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Naira Gains On High Dollar SupplyNaira Gains On High Dollar Supply
Vanguard
Omoh Gabriel, Funmi Komolafe,
Emmanuel Aziken, Peter Egwuatu,
Clifford Amuzuo, Franklin Alli &Yinka Kolawole
16 August 2007
The Naira strengthened yesterday to 126.35 per dollar from 126.43 on Tuesday on strong supply of dollars, traders said. The foreign exchange market has been volatile so far this week as the Central Bank announced a new foreign exchange policy on Tuesday, aiming for full convertibility by 2009 and re-dominating the currency from next August by removing two zeros.
"Dollar liquidity in the market is very high due to sales by some oil companies. The appreciation is mainly being driven by big dollar inflows from oil firms," a trader said.
The naira appreciated to 126.26 ahead of the new policy announcement on Tuesday as dealers expected changes that would accelerate the revaluation of the currency. But the rate slipped back again after the announcement as dealers said the changes were less radical than some had feared.
The CBN said it would distribute fiscal revenues in dollars instead of Naira to the 36 states from next month to deepen the foreign exchange market, and would gradually withdraw from the weekly Dutch Auction System.
The CBN did not sell dollars to banks at its twice-weekly auction yesterday because of the strong Naira rates being quoted by bidders, a banker said.
It was the third time in a month that the bank had not sold dollars at the regular auction, which is its main tool for managing the exchange rate. Dealers predicted further strength for the Naira in the short-term because of expectations of increased dollar inflow from sources other than the CBN.
Copyright © 2007 Vanguard
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