Depreciation of the naira continued on Friday, losing 38 kobo against the dollar at the inter-bank market, despite intervention by the Central Bank of Nigeria (CBN) through foreign exchange (forex) auction worth $392.5 million the previous day.
Inter-bank rates at the money market declined by 0.27 per cent from 11.77 per cent, compared to 11.73 per cent.
The CBN offered $400 million but sold $392.5 million to 22 deposit money banks at N155.74 to the dollar at its bi-weekly Retail Dutch Auction System (RDAS) window.
Expectation was that the naira would firm up with the injection of dollar liquidity into the system, but it closed at N164.78 to the dollar at the inter-bank market, against N164.40 the previous day, according to data collated by Financial Markets Dealers Quotations (FMDQ).
The naira has weakened in recent weeks amid capital outflows, despite interventions by the CBN.
Samir Gadio, emerging markets strategist at Standard Bank, London, noted that with forex sales – and resumed forex forward sales – the CBN has capped the inter-bank exchange rate between N164 and N165 (N164.3 on March 18).
External reserves continue to deplete, falling to $38.3 billion on March 18 from $38.4 billion the previous day.
Gadio said in a report that with the continued slide in foreign reserves, concerns are rising over the stance of the CBN on forex.
In a heavily managed exchange rate, he noted, such a trend in foreign reserves is often the prelude to devaluation and sometimes a run on the currency if the public loses confidence in the foreign exchange regime altogether.