Nigeria sold $16.6 million at its first foreign-exchange forward auction yesterday where only one commercial bank participated, the central bank said.

The Central Bank of Nigeria met the lender’s demand for $10 million due in a month, $616,590 due in two months and $6 million in three, all at a weighted average rate of 151.31 per dollar, the Abuja-based bank said in an e-mailed statement today. That compares with the bank’s spot auction, also held yesterday, where 23 lenders demanded $584 million, the biggest amount sought since Dec. 15, and the bank sold currency at a weighted average rate of 151.31 naira per dollar. Ten banks had successful bids.

“The poor response at the foreign-exchange forward auction is the result of low awareness about it,” Adedayo Idowu, a research analyst at the Lagos-based Vetiva Capital Management Ltd., said by phone. “Investors are very cautious, as this is the first time so they are adopting a wait-and-see attitude.”

Nigeria, sub-Saharan Africa’s second-biggest economy, introduced the foreign-exchange forward auction to reduce demand pressure for dollars at the twice-weekly spot auction and help stabilize the value of the naira. Demand has exceeded supply at every spot auction since Feb. 2, according to data compiled by Bloomberg.
Meeting Demand

The central bank will meet the rising need from investors for foreign currency before elections in West Africa’s biggest economy next month as it tries to stabilize the naira and control inflation, Governor Lamido Sanusi said on March 16. The jump in demand this month is “temporary,” based on investors’ fears that violence between religious and ethnic groups may disrupt elections, he said.

The naira has weakened 2.7 percent this year and traded unchanged from yesterday’s close at 156.11 per dollar at 10:03 a.m. in Lagos.

Forward currency sales won’t minimize pressure at spot auctions “because unlike the forward auction, which is tied to future trade and exports,” the current high dollar demand is tied to concern before the vote, Idowu said.