Bloomberg News

Nigeria Naira Weakens as Bank Fails to Meet Demand

October 24, 2011

(Updates with analyst’s comment in third paragraph)

Oct. 24 (Bloomberg) -- The Nigerian naira weakened after the central bank failed to meet demand from banks at a foreign- currency auction.

The central bank sold $350 million at an auction today, compared with $421.3 million demanded by lenders. The marginal rate, which is also used as the prevailing exchange rate, depreciated 0.05 percent to 150.01 per dollar, compared with 149.94 naira at the previous auction on Oct. 19, the Abuja-based central bank said in e-mailed statement.

“The exchange rate at the auction reflects the amount of dollars available to traders,” Usman Onoja, chief executive of Lagos-based Lovonus Teust and Investment Ltd., which trades currencies, said by phone. “We hope that recent measures announced by the central bank will balance demand and supply and strengthen naira.”

Mounting demand for dollars pushed the naira outside a 3 percentage-point band above 150 per dollar targeted by the central bank, with the rate hitting a record-low 166.6 per dollar on Oct. 10. The central bank outpaced demand for the first time since June 29 on Oct.17 as it offered $400 million compared with $296 million demanded.

The central bank said on Oct. 21 it plans to either buy or sell dollars to banks at the interbank market from time to time in addition to its twice-weekly auctions and weekly forward trading.

The naira gained the first day in two by 0.69 percent to 160.92 per dollar in interbank trading at 4.42 p.m. in Lagos, according to data compiled by Bloomberg.

The bank raised the benchmark interest rate by a record 275 basis points to 12 percent on Oct. 10 in an attempt to rein in foreign-currency demand and stabilize the exchange rate.

--Editor: Gavin Serkin

To contact the reporter on this story: Emele Onu in Johannesburg at eonu1@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net


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