“The surge in dollar sales has basically been a result of the effective demand we’ve been seeing since CBN switched over to the RDAS auction, we’ve been seeing good significant demand and because of that increased demand, they’ve decided to increase the offer,” Kingsley Okereke, Fixed income dealer at Diamond bank told CNBC Africa.
The Central Bank of Nigeria (CBN) recently suspended the Wholesale Dutch Auction System (WDAS) in a step to sanitise the foreign exchange and replace it with the Retail Dutch Auction System (RDAS). The introduction of the RDAS is to ensure transparency in the forex market.
“Yesterday, we saw that they issued about 400 million dollars of which 399 million was sold at a stock rate of 115.80,” he explained.
According to Okereke, the naira price has been able to come down to about 158 levels due to the massive sales by the oil companies.
“Initially, two sessions ago, we saw that there was a bit of depreciation in the naira to 159 levels, the likely responsibility for that is due to residue of unsuccessful bids as the RDAS auction of that day so it filtered into the market. That’s why we saw that depreciation.”
Okereke believes that the naira will hold firm at these levels as there are no spikes expected if the trend persists and if it doesn’t persist, we might see further depreciation in the naira. Nonetheless, he believes it will hold steady.
The Inter-Bank market is currently still flooded with liquidity despite the CBN’s efforts to mop it up, however, the banks are seriously trying to deal with this problem.
“We’ve been seeing them try to issue OMO bills in order to mop up the liquidity, even though they’ve been a bit aggressive on the OMO bills, we’ve not been seeing liquidity dwindling down in the market,” he concluded.