Naira up 5.2%, as Central Bank of Nigeria sells dollar at interbank

The local currency, the Naira ended on a positive note at the close of last week’s interbank market, closing at N308 per dollar which was about 5.2 percent appreciation, compared to the all-time low rate of N353.75 to a dollar that was traded on Thursday.

The naira’s appreciation at the interbank market was attributed to the Central Bank of Nigeria (CBN) participation at the interbank market, which foreign exchange (forex) traders said was in a bid to support the local currency.

Traders also noted that the apex bank has been selling dollars almost daily to boost liquidity and support the nation’s currency.

At the parallel market, naira was bought from market operators at N388 and sold at N394 compared to previous day’s rates of N390 and N394 respectively.

Also, Euro was bought at N425 and sold at N430 which was against the previous day’s rates of N423 and N437 while the naira slumped to the Pound Sterling having been bought at the rate of N497 and sold at N505 compared to Tuesday’s rates of N495 and N500.

However, Nigerian overnight naira interbank lending rate stayed ultra-high on Friday, quadrupling from 6.26 percent since Wednesday as the CBN took steps in the debt and currency markets to try to prop up the ailing local currency.

The central bank sold dollars on Thursday and Friday, traders said. It also sold about 236 billion naira ($776 million) of open market operations (OMO) treasury bills on Thursday, which sent the banking system into a deficit of around 39 billion naira on Friday.

“Liquidity has been tight because of the successful mopping up exercise by the central bank, which sent the market into repo” one dealer said.

Those combined operations pushed the naira up 5.2 percent to 308 per dollar, but also sent the overnight interbank rate soaring to 25 percent on Friday, having hit 22 percent the previous day.

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Traders said the central bank also debited commercial lenders accounts for the purchases of bonds and primary market treasury bills auctioned on Wednesday, which added to the shortage of naira in the market.

Traders said interbank rates should ease by next week when part of July’s budget allocation should enter the banking system.