The Nigerian naira eased against the U.S dollar on the interbank market on Monday after the Central Bank sold dollars at a higher rate than last week at its foreign exchange auction.
The naira closed at 155.85 to the dollar on the interbank market compared to 155.15 at Friday’s close, although the sale of $400 million by state-owned energy company NNPC helped prevent it from slipping further.
“We have NNPC funds in the market, about $400 million, but those who received the dollars are not selling, possibly covering their short positions with the funds,” one dealer said.
Traders said some of the banks were holding onto the funds in view of the closing gap between the central bank’s official rate and the interbank rate.
The central bank sold $300 million at 153.18 to the dollar at its latest bi-weekly forex auction on Monday, short of the $352.54 million demanded and compared to $350 million sold at 153.02 a dollar at the previous auction last Wednesday.
A one percent commission charged at the forex auction meant dollars effectively cost 154.71, narrowing the gap with the interbank rate.
NNPC is the largest supplier of foreign exchange to the interbank market with its large monthly dollar sales usually providing support for the local currency.
Some analysts said continued weakness in foreign reserves compared to year-ago levels were continuing to put pressure on the naira.
Nigeria’s foreign exchange reserves fell to $32.66 billion by May 5 from $34.55 billion a month earlier and remain significantly lower than a year ago. They stood at $40.12 billion by May 5, 2010.
Dealers said the naira could weaken further in the coming days unless the central bank moves to reassure the market that it will continue to support the naira at current levels.
REUTERS
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