Dollar Supply Drops to $2.2bn in May

Dollar notes

by: Obinna Chima

The amount of United States dollars offered by the Central Bank of Nigeria (CBN) at its regulated Wholesale Dutch Auction System (WDAS) decreased by 8.3 per cent to a total of $2.2 billion in May, THISDAY findings have shown.

Data compiled by THISDAY on Monday, showed that the amount reflected a reduction by $200 million, compared to a total of $2.4 billion that was offered by the central bank at the bi-weekly regulated market in April.

However, the central bank sold only $2.018 billion of the greenback out of the amount supplied as against the $2.154 billion that was sold in April.

According to dealers, the public holidays that were declared to commemorate workers’ day on May 1 and Nigeria’s Democracy day celebration on May 29, which fell on two Wednesdays, affected the supply of the greenback.

Just like the previous months, the CBN did not publish the amount of dollars demanded by dealers throughout the seven auctions held in May.

In the month under review, THISDAY checks also revealed that out of the seven sessions observed at the bi-weekly auction, while the CBN offered $400 million to dealers at only one session, it supplied $300 million to market participants at six separate sessions.

The naira was largely stable as it oscillated around the N155 to a dollar band.  The highest value it attained in the month under review was the N155.74, while its lowest value in the month was N155.75 to a dollar.

“Over the short-term, the naira will likely continue to trade on the interbank market within the CBN’s per cent band either side of N155/$,” analysts at Ecobank Nigeria Ltd said.

But the Financial Derivatives Company Limited explained that the naira had remained relatively stable as a result of foreign inflows and the CBN’s intervention.

“Currently trading at N155.74/$ in the official market, we expect foreign portfolio inflows in the capital and forex market especially with the recent interest rate cut in Europe. The entry of foreign capital will continue to help maintain a strong and stable naira in the forex market. We expect the naira to dip slightly as liquidity thins out in the market, barring any significant inflows from portfolio investors,” the research and investment firm predicted.

The WDAS had experienced higher market demand in April, compared to May. The sizeable increase in WDAS greenback supply was then compromised by the inflows from energy companies estimated at $480 million, which proved short to douse rising demand.