By Babajide Komolafe
LAGOS â€” THE naira depreciated by 134 kobo against the dollar at the foreign exchange auction session conducted yesterday by the Central Bank (CBN) in the Wholesale Dutch Auction System (WDAS).
At the end of the auction, the exchange rate of the naira to the dollar rose to N149.75 per dollar from N148.41 per dollar. The CBN sold $183.744 million dollar at the auction.
The naira has been depreciating against the dollar at the official market since the apex bank reintroduced WDAS on Monday, July 13.Â Prior to the WDAS, the exchange rate was N146 to the dollar. Hence, with the increase to N149.75 yesterday, the naira has depreciated by 375 kobo under WDAS.
Foreign exchange market operators attributed this to the rising demand for foreign exchange. Vangaurd investigation reveals that foreign exchange demand has risen sharply since the reintroduction of the WDAS on July 13.
From $960.96 million in the six auction sessions held in July prior to the introduction of WDAS, foreign exchange demand rose to $1.965 billion in the four sessions held under WDAS indicating 104 per cent increase. Also average demand per auction session conducted by CBN jumped to $491.3 million per session from $160.16 million indicating 206 per cent increase.
This promoted the apex bank to review the WDAS guidelines on Tuesday with a view to restricting demand.
In a circular to All Authorised Dealers signed by Director Trade and Exchange Department, Alhaji Batari Musa, and entitled â€œRe: Revised Guidelines for the Operation of the Foreign Exchange Market: Wholesale Dutch Auction Systemâ€, the CBN limited foreign exchnage demand by banks to one tranche of bids per day. Previously banks could submit three tranches of bids per day.
The circular stated, â€œThis is to inform all Authorised Dealers that paragraph 3 (b) of the circular Ref: TED/FEM/FPC/GEN/01/110 of July 8, 2009 on the above subject has been amended as follows: â€œAuthorised Dealers shall submit bids for only one (1) tranche per auction, while the Central Bank of Nigeria reserves the right to reject any bid that is deemed to be unrealistic. This amendment takes immediate effect.â€
A senior bank treasurer who spoke on condition of anonymity, told Vanguard with the measure, foreign exchange end users would not be able to use the exchange rate of the day to determine their bid rate and hence temper the upward pressure on the naira exchange rate.