The apex bank of Nigeria has begin to falter in the supply of foreign exchange into the thereby affecting the value of the greenback.
The naira closed at 370 to the United States dollar on Friday, as dollar supply from the Central Bank of Nigeria continued to wane.
The local unit, which used to hover between 360 and 365 to the greenback, has been trading between 367/dollar and 370/dollar in recent weeks.
The CBN appears to be slowing down in its weekly sale of foreign exchange. The Association of Bureau De Change Operators has said the CBN needed to converge the exchange rate in order to stabilise the naira.
Economic and financial experts have also called for the convergence of the exchange rate. Meanwhile, the naira is expected to appreciate marginally both on the investors’ foreign exchange window and on the black market this week as dollar liquidity is seen rising on the back of offshore inflows.
The naira was quoted at 366.79 per dollar for investors, and traded at around 305.90/dollar on the official market window.
The CBN has been injecting the US currency into the market even as dollar liquidity swelled with rising investor interest in Nigerian assets.
The country’s overnight lending rate dropped to 12 per cent on Friday after spiking to almost 100 per cent on Wednesday due to a liquidity squeeze as lenders paid for hard currency and treasury bills purchased from the CBN.
Money market rates had moderated on Thursday after the Federal Government disbursed N224.54bn ($715.10m) in budget allocations to the three tiers of government, boosting liquidity, Reuters reported.
The CBN also repaid around N95.7bn in matured treasury bills to boost liquidity, traders said. Subsequently, the central bank sold around N26.90bn at an open market treasury auction on Friday to soak up naira liquidity.
Traders said the money market remained liquid despite the auction. One trader expected rates to rise up to 30 per cent this week as the central bank issues more securities to mop up part of government disbursement from the banking system.