The declining fortunes of the naira continued as it suffered 182 kobo depreciation at the foreign exchange auction conducted by the Central Bank of Nigeria (CBN).
The results of the bi-weekly auction showed that the official exchange rate rose to N158.41 to the dollar at the end of the session, from N156.59 at the last auction on Monday. This translates to 182 kobo depreciation for the naira against the dollar, and the largest depreciation at the official market since November 2011. Cumulatively, the naira has lost 202 kobo at the official market this week and 265 kobo this month.
At the inter-bank market, the naira depreciated further by 90 kobo as the inter-bank exchange rate rose to N174.15 per dollar at the close of business from N173.25 on Tuesday. Market sources attributed the depreciation to shortage of dollars in the market, as the CBN did not sell intervention dollars. Consequently, the naira has depreciated by N1 this week at the inter-bank market and by N8.60 this month.
CBN cuts dollar sale by 72%
Meanwhile the CBN has reduced dollar sales at the official auction by 72 percent. Results of the bi-weekly Retail Dutch Auction System (RDAS) session held Wednesday showed that the apex bank reduced dollar sale to $114.04 million, from $397.33 million sold on Monday. This represents the lowest dollar sale in any RDAS session since January 21st this year when the apex bank sold $100 million.
The reduction in dollar sales, and depreciation of the naira, indicates that the CBN has decided to protect the nation’s external reserve instead of defending the naira.
Since the beginning of the year, the apex bank had increased dollar sales at the RDAS in a bid to defend the naira. As at Wednesday, it had sold $30.53 billion representing 20 per cent increase when compared to $25.37 billion sold last year. This however occasioned steady decline in the external reserve, which fell from $43.93 billion at the end of 2013 to $37.55 billion as at November 14th this year.
The decline in external reserve was worsened by the sharp increase in demand for foreign exchange prompted by exit of foreign portfolio investors from the stock market and FGN Bond, in apprehension of the impact of falling crude oil prices on the external reserve on CBN’s ability to continue to defend the naira.
