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Naira Strengthens First Time In Three Days On Currency Sale Bets

By on June 11, 2012

The naira appreciated the first time in three days on speculation central bank will increase dollar sales to support the currency.

The currency of Africa’s biggest oil producer strengthened 0.1 percent to 162.87 per dollar as of 1:29 p.m. in Lagos, the commercial capital, according to data compiled by Bloomberg.

“In the absence of any external dollar inflow, we expect the central bank to lean on the external reserve to defend the naira,’’” analysts at Lagos-based Cowry Asset Management Ltd., led by Edgar Ebinum, wrote in an e-mailed note to clients today.

The regulator, which will sell the U.S. currency at an auction today and on June 13, looks to keep the naira within a 3 percent band around 155 per dollar at its auction to stabilize the currency. The Central Bank of Nigeria sold $600 million at currency auctions last week, the most since February, according to data compiled by Bloomberg.

Foreign-exchange reserves rose to $37.7 billion by June 4, compared with $32.9 billion as of Dec. 29.

“We expect dollar vs naira exchange rate to remain above 160 in the near-term unless the central bank intervenes aggressively,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, strategists at Rand Merchant Bank, wrote in a report today.

The yield on Nigeria’s domestic bonds due 2018 rose three basis points to 15.61 percent, according to the June 8 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due 2021 fell 13 basis points to 5.457 percent.

A “re-emergence of crisis in Europe” put pressure on the naira, central bank Governor Lamido Sanusi said May 22 after the regulator left its benchmark interest rate on hold for a fourth consecutive meeting at a record 12 percent.