CBN intervening with dollar sales to defend ailing naira

Sarah Alade

The Central Bank of Nigeria (CBN) is currently intervening with dollar sales in the foreign exchange market to support the ailing naira currency, its deputy governor told Reuters on Friday.

Sarah Alade said the naira, which has lost around 6 percent so far, had been trading outside its preferred band for some time now, but that the bank will continue to defend the currency.

The unit firmed to 169.70 naira at 1023 GMT on central bank intervention after hitting 173.05 naira in mid-morning trade against the dollar.

“We would continue to defend the currency, we have always said that,” Alade told Reuters by telephone, adding that the bank was comfortable with level of the country’s foreign reserves of around $38 billion.

Asked how far the bank was willing to go to defend the naira, she said: “The markets would dictate that.”

She said that the last time Nigeria devalued its currency, oil prices were lower than now, even though the price is declining.

“At the last time when did that (devalued), we didn’t have the kind of oil prices that we have now, so we are still comfortable,” Alade said.

The currency has come under pressure in the past two months from falling global oil prices, dampening the appetite for assets in Africa’s biggest economy and chief oil exporter.

The naira has touched new intraday lows nearly every trading session on strong dollar demand partly from foreign investors unnerved by falling oil prices, exiting Nigeria and from domestic importers, worried about the risk of a currency devaluation.

The central bank on Thursday restricted the sale of dollars to importers of telecoms equipment, power generators and finished products at its foreign exchange auction, funnelling demand towards the interbank market.

The bank also limited lenders and discount houses from placing more than 7.5 billion naira ($44 mln) each as deposits with the regulator, further swelling interbank naira liquidity.

Source : BusinessDay

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