The Central Bank of Nigeria (CBN), Monday, resumed foreign exchange sales, with $150 million sold to banks in the first foreign exchange auction of the year.
On the other hand, the apex bank also withdrew N83.85 billion from the interbank money market through the sale of debt instrument (treasury bills), which caused interest rates on short term borrowing to rise slightly.
The apex bank suspended foreign exchange auction since December 19 for the Christmas and New Year holidays.
Yesterday, it sold $150 million, indicating 50 per cent decline in amount sold when compared to the $300 million sold on December 19. But the official exchange rate remained stable at N155.7 per dollar.
The naira, however, continued to appreciate at the interbank foreign exchange market, where it gained another 10 kobo against the dollar. The interbank exchange rate opened the day at N155.20 but closed at N157.10 per dollar.
Investigation revealed that the appreciation of the naira was due to weak demand aggravated by the foreign exchange sold by the CBN yesterday.
Meanwhile, interest rates moved in opposite direction at the interbank money market, yesterday, with rates on short term borrowing rising while those on long term lending falling slightly. While interest rates on Overnight/Call and 7Days borrowings rose by 25 basis points and basis points, interest rates on 30Days and 60Days borrowings fell by 12.5 and 20.8 basis points.
The rise in interest rates on short term borrowing was caused by the sale of government debt (treasury bills) by the CBN yesterday which led to outflow of N83.856 billion from the funds available in the market.
On the international scene, the euro rose for a second day against the dollar, reversing earlier losses, after failing to drop below its 50-day moving average.