Nigeria'sNaira Drops

The naira eased against the dollar on Tuesday despite the Central Bank of Nigeria’s selling of more dollars on Monday at its forex auction, due to strong demand for the greenback, dealers said.

The central bank sold $249m at N168 to the dollar, at its twice-weekly auction on Monday, dealers said higher than the $200m it earlier offered. The bank has been selling the dollar at N168 since after it devalued the currency. But the interbank market has traded lower.

The naira, which opened at 182 to the dollar, hit 184.50 shortly after the interbank market opened. The naira closed at 181.20 to the greenback on Monday.

On Tuesday, however, the naira closed at 183.70 to the dollar at the interbank market.

The CBN had on Monday asked commercial banks to hold 0.1 per cent of their shareholders’ funds in foreign currency, reversing a directive enforced last month to stop lenders from dealing in hard currency on their account.

The move was intended to curb speculation in the naira, which has been hit hard in the past few months by falling oil prices.

“The market re-opened two-way quotes today with the central bank allowing banks to hold some dollars against their position, (but) there was no liquidity,” one dealer told Reuters.

The central bank devalued the naira two months ago, and in December tightened trading rules to try to curb speculation against the currency, slowing trading to a trickle.

The devaluation of its target band by eight per cent to N160-N176 against the dollar was meant to halt the slide in foreign reserves. But the naira has traded well outside that band, and reserves are still falling.