Naira Drops Further As CBN Cuts Dollar Supply

Naira Drops Further As CBN Cuts Dollar Supply

The naira dropped the most in two weeks after the Central Bank of Nigeria reduced dollar supply at its bi-weekly auction on Wednesday.

The currency of Africa’s largest oil producer weakened by 0.3 per cent to N157.38 a dollar as of 3pm in Lagos, the most on a closing basis since December 15, according to data compiled by Bloomberg.

The CBN sold $120m at a foreign currency auction on Wednesday, the lowest in three auctions, the Abuja-based bank said in a statement on its website.

The regulator, which sells dollars on Mondays and Wednesdays to stabilise the local currency, is the major supplier of the currency.

The Chief Executive Officer, Forward Marketing Bureau de Change Limited, Mr. Abubakar Mohammed, said, “The naira is depressed by the small volume of dollars offered by the CBN. The naira may regain support later in the week from oil company sales.”

Oil companies, which sell dollars to lenders by the month-end to meet local spending needs, are the second-biggest source of foreign currency.

The CBN kept its benchmark interest rate unchanged for the eighth time on January 21 to stabilise the naira.

The inflation rate in December eased to 12 per cent, from 12.3 per cent in the previous month, as the effects of flooding that damaged agricultural output last year began to subside.

The yield on the country’s 16.39 per cent domestic bonds due in January 2022 fell nine basis points to 11.21 per cent in the secondary market, according to data on the Financial Markets Dealers’ Association website on Tuesday.

The yield on $500m of Eurobonds due January 2021 rose four basis points to 3.876 per cent on Wednesday, while Ghana’s cedi appreciated 0.1 per cent to 1.9010 a dollar in Accra.

The naira strengthened, paring a weekly loss, as foreign investors brought dollars into the country to buy Nigerian debt after sales last week.

The Governor, CBN, Mr. Lamido Sanusi, had said relative stability in the currency might be attributed to more foreign exchange from oil companies and investor inflows.

The inflation rate would be slower in 2013 compared with last year and might be close to 10 per cent in January, Sanusi said in an interview at the World Economic Forum in Davos, Switzerland.

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