Despite the series of dollar supplies into the various segments of the forex market, the naira closed at 410 against the United States dollar on last Thursday, fuelling concerns about the CBN dollar interventions.
Currently, Deposit Money Banks lack naira liquidity to bid to buy over $39m out of the $100m offered for sale by the Central Bank of Nigeria because:
1. The Nigerian interbank lending rates rose sharply by around 100 percentage points on Thursday, as commercial lenders scrambled for cash to pay for bond purchases and cover their positions.
2. Overnight lending rates rose to around 300 per cent from 200 per cent at the end of trading on Wednesday, as naira liquidity dried up in the banking system and some banks were forced to borrow from the CBN, Reuters reported.
3. The Federal Government raised N105.32bn from bond sales last week, and payment for the debt sale was due on Thursday, draining liquidity in the market and pushing further up the cost of money in the market.
4. The CBN has consistently sold dollars at both the spot and forward markets, and required banks to pay for the purchase. This has drained liquidity in the market. The nation’s financial markets were closed on Thursday for the Easter celebrations and will reopen on Tuesday.
Despite these,analysts say the naira is likely to strengthen this week on increase in dollar sales to foreign exchange bureaus.
