Naira depreciates further amid tight dollar supply

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By JONAH NWOKPOKU with agency report

The naira has weakened further on Wednesday on the back of strong demand for the dollar even as the Central Bank of Nigeria, CBN pledged that it had no plans to devalue the local currency.

The naira fell to N163.6 to the dollar on the interbank compared with N162.95 a dollar on Tuesday.

The Reuters news agency reported some dealers saying that limited dollar supply from oil companies had weakened the naira along with the central bank’s decision, so far, not to sell dollars directly to lenders.

“Many customers who could not win their bids at the official forex auction resorted to the interbank market to cover their positions, putting the naira under pressure,” one dealer said.

“We expect that the Nigeria National Petroleum Corporation, NNPC will sell dollars before Friday or at latest next week, while possible direct dollar sales by the central bank could help support the naira in the near term,” another dealer said.

The central bank said on Tuesday it would resist pressure to devalue the naira since it retains ample funds to defend the currency.

Recall that the CBN in July hiked the cash reserve requirement for public sector deposits to 50 per cent from 12 percent in a bid to tighten naira liquidity and shore up its value but has failed to stem the currency’s decline.

In the official window, the central bank sold $260.75 million at 155.76 to the dollar, compared with $285 million at the same rate on Monday.

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