By Babajide Komolafe
The naira depreciated again at the official market and the interbank market yesterday as the Central Bank of Nigeria failed to meet foreign exchange demand at the Wholesale Dutch Auction System (WDAS).

naira sign

The naira depreciated by nine kobo at the official market while it lost three kobo at the interbank. The central bank sold $350 million at 148.89 naira a dollar at WDAS  auction on Wednesday compared to a peak demand of $404.65 million. The bank had earlier sold $250 million at 148.81 naira a dollar on Monday.

On the interbank market, the naira was trading at 151.42 a dollar, weaker than the 151.39 it closed at on Tuesday, as the market reacted to the shortfall in forex supply at the official auction.

The naira has been on the downward trend since Monday due to unsatisfied demand at WDAS  as well as anxiety over the fortunes of the naira in face of declining external reserves.

On Monday, the naira depreciated in both the official market and the interbank market owing amidst increasing anxiety over continues decline of the nation’s external reserve.

Result of the Wholesale Dutch Auction System (WDAS) session conducted by the Central Bank of Nigeria (CBN) yesterday show that the official exchange rate rose to N148.81 per dollar from N148.75 last week, indicating six kobo depreciation.

Also at the interbank foreign exchange market, the naira depreciated by 11 kobo as the interbank rate rose to N151.3175 per dollar to N151.205 per dollar. On Tuesday, the naira depreciated further in the interbank foreign exchange market losing  six kobo.

Investigation revealed that the interbank foreign exchange rate rose slightly to N151.3825 yesterday up from N151.3175 per dollar on Monday. Interbank market sources told Vanguard that the depreciation was prompted by excess demand occasioned by the 50 per cent fall in foreign exchange supplied by the Central bank of Nigeria at the foreign exchange auction conducted on Monday.

“We see the naira depreciating further for the rest of the week since most of the oil companies are done with their month-end dollar sales,” one dealer said. Importers and foreign investors repatriating their profits after the release of full-year results of scores of companies have put a lot pressure on both markets in the last two months, forcing the central bank to raise its dollar offer from $250 million on average per auction to between $350-450 million.

Analysts said with the sharp decline in Nigeria’s foreign exchange reserves, the central bank’s ability to support the market was being threatened. The reserves fell to $37.81 billion on Monday from $38.79 billion a week earlier.
Meanwhile, the euro yesterday gained for second day against the dollar and yen as stocks and commodities advanced before the European Central Bank announces a decision tomorrow on interest rates.

The dollar fell against most major counterparts as Federal Reserve Chairman Ben S. Bernanke reiterated to a congressional panel that the U.S. recovery is being restrained by the housing and commercial real-estate markets and repeated his call for lawmakers to come up with a long-term deficit-reduction plan. The yen fell against most major peers on speculation the global economy will weather Europe’s debt crisis.