BY FAVOUR AGBI With Agency Report
THE tightening of monetary policy measures introduced by the Central Bank of Nigeria, CBN, has continued to yield positive results, as the naira, Wednesday, firmed sharply at N150 against the United States’ dollar.

This was after the CBN pumped dollars into the market and cleared all forex demand at its bi-weekly auction. The CBN sold all the $591.67 million demanded at N150 to the U.S. dollar at the auction, a rate not seen since July, compared to $400 million sold at N156.91 at its previous auction on Monday.

The naira opened at 157.40 against the dollar at the interbank, firming from Tuesday’s close of N158.90 and up six percent from the record low of 167.8 reached before the CBN imposed several monetary tightening measures at an emergency meeting on Monday.

However, Nigeria’s foreign reserves dipped to $30.86 billion as at October 7, compared to $31.75 billion recorded at the end of September. The current figures represent a decline to the lowest level published in the CBN records dating back to September 2010.

The declines in the reserves, according to analysts, could be partly related to the surge in dollar demand at the central bank’s bi-weekly auctions. Also, the Federal Government of Nigeria said it plans to sell N55 billion ($346.13 million) in three-year, five-year and 10-year sovereign bonds on October 19, at its tenth monthly debt auction this year.

According to a statement by the Debt Management Office, DMO, the government would sell N8.0 billion of the three-year maturity, N17 billion of five-year and N30 billion of 10-year bonds, which are due to mature in 2014, 2015 and 2018, respectively.

The DMO noted that all the issues are re-openings of previous issues and the results of the auction will be published the following day. It said in a statement: “Kindly note that for re-openings of previously issued bonds (for which the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.”

Benchmark interest rate

The CBN, had on Monday, increased the benchmark interest rate, the Monetary Policy Rate, MPR, by 275 basis points to 12 percent, far higher than analysts expected, but the regulator’s bold actions to support the naira have a cost.

CBN Governor, Lamido Sanusi said that raising interest rates and tightening other areas of monetary policy would soon result in higher forex reserves but for now the trend continues to be declining reserves, despite high oil prices and production. “The Nigerian National Petroleum Corporation, NNPC, is expected to sell around $700 million to some lenders this week, further strengthening the local currency at the interbank,” a dealer, who spoke on the condition of anonymity, said.

It firmed further to 156.27 naira to the dollar after results of the auctions were announced but has been volatile since the meeting. Nigeria’s foreign reserves stood at $30.86 billion at October 7, declining to multi-year lows. It stood at $34.84 billion a year ago.