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By NBF News
Listen to article With the bi-weekly dollar auction of the Central Bank of Nigeria (CBN) to be suspended tomorrow, December 19, 2012, fear of foreign exchange shortage has cranked up the demand for the United States currency.

The festive period dollar rush also coincides with the rise in inflation as announced by the National Bureau of Statistics as the value of the naira slipped to its weakest in a month.

The value of the naira dropped by 0.3 per cent to 158.07 to the dollar, the weakest since November 16. Dealers said companies have increased demand for foreign currency after the CBN said it would end dollar sales to lenders at the twice-weekly auctions on December 19, 2012 and resume on January 7, 2013.

The Chief Executive Officer of Valuechain Investment Limited, Tunde Ladipo, said, 'Dealers speculate that the dollar supply won't be enough to meet demand during the festive season as auctions end.'

The apex bank had at the Monday auction sold $200 million compared with $180 million which it sold at the last auction last week. The last auction for the year will hold tomorrow.

However, Nigeria's inflation rate rose for the second consecutive month in November to 12.3 per cent from 11.7 per cent. This is inspite of efforts by the CBN to control inflation which included leaving the monetary policy rate unchanged at 12 per cent.

Emerging-markets strategist at Standard Bank Group Limited in London, Samir Gadio, noted that 'Inflation picked up in November, moderately exceeding our 11.6 per cent forecast. 'This uptick in inflation will also make it more difficult for the CBN to start easing monetary policy at its January meeting.'

Yields on 10-year naira debt fell three basis points to 11.85 per cent, according to December 14 prices compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation's $500 million of Eurobonds due January 2021 fell two basis points to 4.114 per cent.

Also, call rate at the interbank market inched up to 14.83 per cent from 14.5 per cent, while 7-day money rose to 15.12 per cent from 14.83 per cent.