Naira Falls to 3-Month Low; Dollar Supply Curbed at Sale

Nigeria’s naira depreciated to its weakest level in three months against the dollar after the central bank failed to meet lenders’ demands for the U.S. currency at an auction yesterday.

The currency of sub-Saharan Africa’s second-biggest economy retreated 0.3 percent to 157.15 naira per dollar in interbank trading at 3:44 p.m. in Lagos, the lowest level since June 16, according to data compiled by Bloomberg. Nigeria sold $350 million compared with $467.6 million demanded by lenders at an auction yesterday, with naira declining 0.2 percent to 153.90 naira, the Abuja-based Central Bank of Nigeria said. It was the 20th straight auction where demand exceeded supply.

“Dealers expect depreciation of the naira in interbank trading today owing to the low dollar supply in the official foreign-exchange market,” analysts at Lagos-based Diamond Bank Plc wrote in an e-mailed note to clients today.

Africa’s biggest oil producer uses its foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 naira per dollar at its twice-weekly dollar sales to help curb inflation.

Nigeria’s central bank raised its benchmark interest rate yesterday for the fifth time this year by 50 basis points to 9.25 percent to rein in inflation and support the naira.

Bloomberg