By Amaka Abayomi
Foreign exchange demand and the interbank lending rate rose slightly on Monday, even as the naira recorded mixed performance.

Results of the Wholesale Dutch Auction conducted by the Central Bank of Nigeria (CBN) on Monday show that foreign exchange demand rose by 3.4 per cent to $352.7m from $342,3m last Wednesday.

The amount sold by apex bank also rose by 40 per cent to $350m from $250m. The official exchange rate, however, dropped marginally to N150.68 per dollar indicating 3.4 kobo appreciation. But the naira depreciated by 8.2 kobo at the interbank foreign exchange market, as the interbank rate rose to N154.36 per dollar from N154.2775 on Friday.

Meanwhile, interbank lending rates open the week on a higher note, owing to increase scarcity of funds.
Interest rate for Call lending rose by 50 basis points from 9.04 to 9.54 per cent. Interest on 7-days lending rose by 25 basis point from 9.67 to 9.92 per cent, while interest rate on 30 days lending rose by 29 basis points from 10.71 to 11.0 per cent.

It would be recalled that the Financial Market Dealers Association of Nigeria, FMDA, had projected that naira may depreciate further this week due to rising demand for foreign exchange without corresponding increased supply.

“Following the high FX demand without corresponding dollar liquidity into the market, Naira may depreciate further”, the Association said in its weekly review of the financial markets.

Review development in the foreign exchange market last week, the Association said, “The foreign exchange market in the week mirrored last week’s business activities as Naira-Dollar relationship remained mixed at the Inter-bank market, moderated downward marginally at the WDAS and recorded loss at BDC and parallel markets.

“Depreciation was recorded at all the markets as a result of increase in FX demand relative to its supply.

“Further analysis of the markets showed that Naira depreciated by 15 kobo on Wednesday relative to Monday’s exchange rate and also lost 26 kobo when compared with the corresponding period of the preceding week.

“At the interbank market, Naira depreciated by 114 kobo relative to its opening rate and dropped 94 Kobo when compared to the corresponding period of the preceding week.

“The BDC and Parallel markets depreciated by 50 kobo and 100 kobo respectively to close the week at N155.5 and N156.000 per dollar respectively.

“The CBN continued to moderate the volume of dollar sold to the authorized dealers to manage the foreign exchange market. At the bi-weekly auction of Monday and Wednesday, it offered and sold $500million as against $617.79million sold last week.

Market demand was $676.5million relative to USD$697.2million in the preceding week. The observed market demand was 35.3% higher than amount eventually sold unlike last week where market demand exceeded volume sold by 12.0%. The upsurge in demand relative to limited supply is putting pressure on the strength of Naira.”