ByÂ Babajide Komolafe
The declining fortune of the naira in the interbank foreign exchange market worsened yesterday as it depreciated by 260 kobo against the dollar.
At the close of business yesterday the interbank exchange rate rose to N152.1 per dollar from N149.5 per dollar indicating 260 depreciation. The depreciation was precipitated by the 52 kobo depreciation of the Naira at the official segment of the market on Monday.
Analysis of the foreign exchange auction conducted the Central Bank of Nigeria (CBN) on Monday reveal that the exchange rate rose to N147.53 per dollar from N146.51 per dollar last week implying 52 per cent depreciation for the naira. The depreciation was occasioned by sharp jump in demand for foreign exchange which rose to $325 million from $127 million in the previous auction.
In the same vein the apex bank increase the amount of foreign exchange offered by 100 per cent to $200 million from N100 million in the previous auction.
It would be recalled that the naira appreciated consistently for two weeks until last week when the CBN in response to falling foreignÂ Â exchange demand reduced foreign exchange supply by 50 per cent at the Wholesale Dutch Auction System (WDAS) sessions.
Analysis of WDAS foreign exchange auction sessions conducted by the Central Bank of Nigeria (CBN) last week reveals that the amount of foreign exchange offered for sale fell by 66 per cent to $200 million from $600 million. Though demand fell slightly by 6.8 per cent but total sales fell sharply by 68.9 per cent. Foreign exchange operators attributed the reduction in the foreign exchange offered to the steady fall in foreign exchange demand at the WDAS sessions.
It is also believed that this might be an attempt to halt the recent appreciation of the Naira by ensuring the dollar exchange rate does not fall far below N147 per dollar which is the exchange rate benchmark for the 2010 to 2012 budget framework.
The action of the apex bank however caused the Naira to depreciate by 330 kobo in the interbank foreign exchange market as the interbank foreign exchange rate roseÂ to N149.5 per dollar from N146.3 per dollar in the previous week. However, at theÂ WDAS sessions Naira continued its appreciation against the dollar as the official exchange rate dropped to N146.51 per dollar.
A foreign exchange dealer said that the apex bank turned down a significant number of foreign exchange bids at WDAS and this increased demand at the interbank market.