Naira strengthens to 1596 as CBN sells $876.26m at N1,495 in retail auction
The naira gained marginally in official trading on Wednesday following the sale of $876.26 million by the Central Bank of Nigeria (CBN) in a retail auction aimed at shoring up the ailing currency.
According to data from FMDQ, the naira strengthened to N1596 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) from N1601/$ the previous day.
The CBN, had in a circular Wednesday, disclosed that it sold a total of $876.26 million to end users whose bids were submitted by some 26 banks, at a rate of N1495 per dollar.
The amount sold is the single largest by the CBN under Governor Olayemi Cardoso.
“The sale provides a temporary breather for the naira,” one currency trader said.
“The market will however want to see a more defined pattern to the sales before we know what it means for the naira going forward,” the trader said.
Total bids at the retail auction came to US$1.18 billion which was received from 32 authorised dealer banks.
Of this, bids valued at US$876.26 million from 26 banks qualified, while bids valued at US$313.69 million from six banks were disqualified.
The disqualifications were due to four banks submitting bids after the 3:00PMcutoff time and two banks failing to provide bids in the required template. Additionally, all bids with Form Q and unverifiable Forms A and M on the Trade Portal were disqualified.
The CBN approved a cut-off rate of N1495/US$ for the Retail Dutch Auction.
Omolara Omotunde Duke, director of the Financial Markets Department, affirmed the CBN’s commitment to boosting FX liquidity and promoting price discovery through this auction process.
The sale follows “growing unmet foreign exchange demand” which has “continued to increase the demand pressure in the foreign exchange market, with adverse impact on the exchange rate of the naira,” the Abuja-based Central Bank of Nigeria said in a circular to lenders last week.
The naira has come under pressure through seasonal demand from summer tourism as well as businesses seeking the greenback to bring in goods in the import-dependent nation.
The naira however weakened at the parallel market as demand swelled. The $313.69 million bids that were disqualified may have also found their way into the black market.
The local currency traded at N1,620 per dollar on Wednesday compared to N1,603/$1 traded on Tuesday at the parallel market also known as the black market.