Naira remains relatively stable despite close of official auction

Photo: vanguardngr.com
Photo: vanguardngr.com

Naira traded at about N158.50 to the dollar as at Thursday.

Nigeria’s Naira has remained relatively stable, even after the Central Bank OF Nigeria, CBN, last week, closed its foreign exchange auctions for the year.

The Naira traded at about N158.50 to the dollar, the Bureau de Changes, BDCs, operators and traders said on Thursday.

Because of the closure of the foreign exchange auction by the CBN, traders now have to source for the dollar and other currencies from the interbank and black market.

“The Central Bank has closed for the year, so we have opted for black market. We do not have all our demands met” Gali Kabiru, a BDC operator and a representative of a section of some currency changers in Marina, said.

Mr. Kabiru said due to the Christmas season and year end activities, more naira was needed to purchase other currencies. “It is Christmas season. Prices and currencies are up. People are buying now, to go and import things for customers, so demand is rising” he said.

Mr. Kabiru said that as at last week, the situation was disquieting to the extent that banks did not sell the dollar because they had already sold to their customers, and could not meet up with demand.

“I applied, they could not pay me all that I applied for, I had to go and get the balance because they couldn’t meet my demand. Exchange rate rose to N159.50 to a dollar” he said.

But an optimistic Mr. Kabiru projected that things would go back to normal in January.

Traders struggled for the available dollars on the interbank market to cover their customers’ demands, after they were unable to get enough dollars at the official auction, even from the banks.

The relative stability of the Naira has temporarily put to rest the apprehension of its fate after the regulatory body closed its official foreign exchange auction for the year, an event which could put more pressure on the interbank to meet the demand. There were fears that the Naira could depreciate further if major inflows are not channeled into the market.

The Naira fell against the dollar on the interbank last week, heightened by the strong demand for dollar, apparently even from the banks. The Naira, which fell to about N159.50 to a dollar at BDCs, closed at about N158.10 the dollar, as to N157.65 noted upper week.

Despite this incident, which could be linked to fear and speculations on the fate of the Naira, the exchange rate has shown commendable stability in recent times.

“Exchange rates showed remarkable strength and stability against the dollar as a result of Central Bank’s Forex management measures” Bismarck Rewane, the Managing Director of Financial Derivative Company, said.

He said there is a Year to Date, YTD, appreciation of 0.59 per cent at the official market to N155.75 per dollar and a trading range bound at N157.50 per dollar to N158.1 per dollar at the interbank market. The Naira’s stability may help to sustain growth in the nation’s external reserves to $47 billion in the first quarter of 2013 and a likely depreciation of the Naira is to average N157 per dollar.