Naira drops to three-week low

The naira headed for its weakest level against the dollar since July 23 as demand increased before the Central Bank of Nigeria’s second foreign-exchange auction of the week.

A Bloomberg report on Wednesday stated the nation’s currency retreated by 0.2 per cent to 160.85 per dollar as of 1.02pm in Lagos, the lowest on a closing basis in more than three weeks.

The naira weakened by 2.9 per cent this year, the worst in West Africa after the Ghanaian cedi and Liberian dollar, among 24 of the continent’s currencies tracked by Bloomberg.

The CBN on Wednesday offered the sum of $300m for sale at the foreign exchange auction, in its bid to support the local currency.

The CBN had sold $221.6m on August 12, the lowest since May 15.

The regulator is the biggest supplier of the United States currency and offers foreign exchange at a target of plus or minus three per cent of 155 per dollar.

“Importers that couldn’t meet their demand for dollars at the auction are resorting to the interbank market, thereby putting the naira under pressure at that window,” said Kunle Ezun, an analyst at Ecobank Transnational Inc in Lagos, by phone on Wednesday.

“An increase in central bank supply will reduce the pressure,” he added.

The bank’s Monetary Policy Committee left its benchmark interest rate at a record 12 per cent for the meeting on July 23 to protect the nation’s economy.

The CBN also introduced a 50 per cent cash reserve requirement on public-sector funds after warning about the risk of excess liquidity.

Yields on Nigeria’s $500m Eurobonds due January 2021 were little changed at 5.48 per cent. Borrowing costs on local-currency debt due January 2022 rose six basis points, or 0.06 percentage point, to 13.09 per cent on Tuesday, according to data compiled by Bloomberg.

Ghana’s cedi was unchanged at 2.0950 per dollar in the capital, Accra.


Source: Punch