By Babajide Komolafe
The Central Bank of Nigeria sold $25.917 billion in the official foreign exchange market in 2010, while the nation’s external reserves fell by $10.2 billion.
From $42.4 billion in 2009, external reserves declined in 2010 to $32.4 as at December 24th, indicating 23 per cent decline. Compared with the closing figure of $53 billion at end of 2008, the external reserves have fallen by $21. 8 billion or 41 per cent in two years.
Analysis of foreign exchange auctions conducted by the CBN under the Wholesale Dutch Auction System (WDAS) in 2010 revealed that total demand fell to $27.57 billion from $38 billion in 2009, indicating 27 per cent decline, while the amount offered for sale by the CBN stood at $26.27 billion. The apex bank however sold $25.917 billion, representing 13.6 per cent decline when compared with $22.8 billion sold in 2009. The amount sold by the apex bank represents 94 per cent of foreign exchange demand at WDAS for the year.
In the first quarter the CBN offered $6.1 billion while demand for foreign exchange was $6.894 billion. The apex bank however sold $5.151 billion.
In the second quarter, demand rose by 7.2 per cent to $7.362 billion while the apex bank increased amount sold to $6.629 billion, which was below the $6.9 billion actually offered for the quarter.
In the third quarter, demand rose sharply by 32 per cent to $9.479 billion while the amount sold also rose by 15 per cent to $7.632 billion, which was marginally above the $7.55 billion actually offered.
However, in the fourth quarter, foreign exchange demand fell by 33 per cent to $6.392 billion, while the amount sold also fell by 24 per cent to $5.803 billion.
The decline in foreign exchange demand and the fact that the apex bank was able to satisfy 94 per cent of the demand enhanced stability of exchange rates for most part of the year. As a result the official exchange rate, the interbank rate and the parallel market rate remained within the -/+3 % band during the year except for December.
However due to demand pressure, exchange rate peaked in September and December. In September, official rate closed at N149.95 per dollar, Interbank at N154.54 per dollar, and parallel market at N155.5 per dollar. In December, official rate closed at N149.17, Interbank at N154.81 and parallel market at N157 per dollar.