Nigeria Content Online

The Nigerian naira
eased against the U.S dollar on the interbank market on Monday after
the Central Bank sold dollars at a higher rate than last week at its
foreign exchange auction.

The naira closed at
155.85 to the dollar on the interbank market compared to 155.15 at
Friday’s close, although the sale of $400 million by state-owned energy
company NNPC helped prevent it from slipping further.

“We have NNPC funds
in the market, about $400 million, but those who received the dollars
are not selling, possibly covering their short positions with the
funds,” one dealer said.

Traders said some
of the banks were holding onto the funds in view of the closing gap
between the central bank’s official rate and the interbank rate.

The central bank
sold $300 million at 153.18 to the dollar at its latest bi-weekly forex
auction on Monday, short of the $352.54 million demanded and compared
to $350 million sold at 153.02 a dollar at the previous auction last
Wednesday.

A one percent
commission charged at the forex auction meant dollars effectively cost
154.71, narrowing the gap with the interbank rate.

NNPC is the largest
supplier of foreign exchange to the interbank market with its large
monthly dollar sales usually providing support for the local currency.

Some analysts said
continued weakness in foreign reserves compared to year-ago levels were
continuing to put pressure on the naira.

Nigeria’s foreign
exchange reserves fell to $32.66 billion by May 5 from $34.55 billion a
month earlier and remain significantly lower than a year ago. They
stood at $40.12 billion by May 5, 2010.

Dealers said the
naira could weaken further in the coming days unless the central bank
moves to reassure the market that it will continue to support the naira
at current levels.

REUTERS