By Amaka Abayomi
DEMAND for foreign exchange for the month of September dipped by 7.14 per cent when compared to the month of August which also slowed down by 9.4 per cent.

According to the Financial Market Dealers Association’s Monthly Financial and Economic Report for September 2011, the drop was due to dollar injection from the autonomous sources, which was in the range of $1bn – $1.75bn.

Continuing, the Report stated that due to persistent demand pressure, the Central Bank of Nigeria (CBN) corridor of +/- 3% exchange rate management between the Naira/$ was breached in the month under review as Naira slid further against the dollar to $1/N155.020 at the CBN window.

“Most significantly, the depreciation of Naira was noticeable in the WDAS and Inter-bank market as its recorded appreciable gains in the BDC and Parallel markets. In the month under review, Naira/Dollar relationship at the CBN window (WDAS) opened at $1/ N152.81 and closed at $1/ N154.60 representing a loss of N1.79 or 1.17 per cent.

“Trading at the 2WQ Inter-bank market opened at $1/ N154.7250 and closed at $1/N160.2775, representing a loss of N5.55 or 3.59 per cent.

“Naira/Dollar relationship at the BDC/Parallel market opened at $1/ N167.50 at the BDC/Parallel market, it traded mid-month at $1/ N158 and closed the month at $1/ N160.00 representing a gain of N7.50 or 4.47 per cent. The widened gap observed between the official and parallel markets mid-July 2011 reduced significantly in the month.

“Major reasons that could be adduced was the removal of ceilings on the volume of foreign exchange sale to the Bureau de’ Change operators from the autonomous funds weekly by the Deposit Money Banks, and the consistency of CBN in the sale of foreign exchange $100,000 to licensed BDCs per week.

“The premium between CBN and Parallel market as at month-end September was N5.40 representing 3.49 per cent. The month-end figure is less than the IMF benchmark of 5.00 per cent, but poor information management could still give room for speculation and panic buying in the market.”

The Federal Accounts Allocation Committee (FAAC) appropriated N601.023bn in the month of September 2011, from which N288.49bn, representing the allocation to states and local governments hit the market in the month of September against N295.79bn in the previous month.

The Monetary Policy Committee equally increased the Monetary Policy Rate (MPR) by 50 basis points to 9.25 per cent in the month. This singular action further reemphasized the contractionary monetary policy stance of the CBN; and the immediate impact on the market was a proportionate movement in rates.

With market liquidity in the range of N100.00bn as a result of the injection from matured bills recorded on 1st September 2011, rates opened on average of 8.500% for Call and 9.000% for seven days money.