The burgeoning demand for forex at the Central Bank of Nigeria’s (CBN) Wholesale Dutch Auction System (WDAS) disappeared Monday as the apex bank flooded the market with the greenback to continue its defence of the naira.

Data posted on the CBN website showed that total demand for the greenback fell significantly by 50 per cent to $297 million, compared with the $591.666 million recorded last Wednesday.

The amount offered by the banking regulator far outweighed the demand by the currency dealers.

In fact, whereas the CBN offered a total of $400 million, total demand stood at $297 million.

As a result of the apex bank’s action, the naira which had passed through turbulent times recently was upbeat against the United States dollar at the end of trade at the bi-weekly auction as it closed at N149.94.

The value of the Nigerian currency at the bi-weekly auction Monday represented a slight appreciation by 6 kobo, compared with the N150 to a dollar it stood last Wednesday.

Dealers attributed the gain recorded to a decline in the demand for forex witnessed at the WDAS.

The naira had fallen to N160.70 to a dollar at the interbank market last Thursday, compared with the preceding day’s value of N157.10 to a dollar.

Currency dealers had informed THISDAY that the local currency, which was sold by banks at about N161 to a dollar last Thursday morning, suddenly slipped to about N162.50 to a dollar at mid-day.

Market operators attributed the fading appetite for the dollar at the WDAS to the policies that were adopted by the regulator last week.

THISDAY findings showed that the last time the local currency traded at its current band (around N149/$1) was in January.

The CBN had, in a bold move to save the local currency for further decline, held an emergency meeting where stringent monetary policy measures were adopted.

The measures were basically intended to reduce the quantity of naira in the system and free up dollar supply.

The CBN’s Monetary Policy Committee (MPC) had, among other measures, raised the Monetary Policy Rate (MPR) - benchmark interest rate - from 9.25 per cent to 12 per cent, representing an increase of 275 basis points.

Another measure, also geared towards improving the value of the naira that was adopted by the regulator last week, was to stop the purchase of forex by multinational firms operating in the country from the WDAS.

The banking sector regulator had directed that such foreign firms could only source for the greenback through the use of autonomous funds – that is through banks.

CBN Governor, Malam Sanusi Lamido Sanusi, said then that the weakness suffered by the naira against the dollar would be in the short term, adding that the various measures adopted were expected to strengthen the value of the currency.

“My feeling is that the naira is going to strengthen as measures kick-in. What you are seeing this week is not the long-term trend. We haven't yet seen the major impact of these measures yet. We will see these speculating oil marketers disappearing and then it will be genuine importers coming to the window.

“We will see if they are sitting on cash. We have not introduced capital controls. We are simply saying if you are bringing in capital into the market then you can also take from the market,” Sanusi had told Reuters.

To Defend the Naira, CBN Floods Market with Dollars