Central bank has sold the dollar at its new target mid-band of 168 naira at its forex auction on Monday, depreciating the currency by 1.78 percent from 165 naira it had auctioned the unit at its previous auction, dealers said.
The bank sold around $169 million to lenders at the auction, short of meeting demand for the greenback, dealers said, pushing the excess demand to the interbank market. The bank devalued the naira by 8 percent against the dollar last week.
The naira hit 187.55 in the interbank market shortly after it opened, as dealers scrambled to fill demand orders not met at the central bank auction the previous day.
Naira hit yet another record low against the dollar on yesterday, trading outside the target band set by the central bank last week after the bank auctioned dollars at the currency’s newly devalued rate, dealers said.
The currency traded at 187.55 naira on the interbank market, or 6.2 percent below the lower end of the new band, shortly after the market opened, as dealers scrambled to fill orders not met at a central bank’s twice-weekly auction on Monday.
It sold about $169 million dollars at 168 naira at the auction versus last week’s rate of 165 naira, dealers said, compared with its usual $200 million and $300 million at previous auctions.
The bank has also been selling dollars daily to commercial lenders to try to prop up the currency.
“The market is reacting to the depreciation of the naira at the auction on Monday and central bank’s inability to meet demand,” one dealer said.
The bank set a target band of 5 percent plus or minus 168 naira to the dollar last week, an 8 percent devaluation, to try to halt a decline in the foreign reserves of Africa’s leading energy producer as oil prices slump. Reuters