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Naira Gains For Second Day On Bank Supply, Dollar Sale Bets

By on July 4, 2012

The naira strengthened for a second day, heading for the biggest gain in more than a week, as the central bank auctioned dollars and on speculation oil producers will sell the U.S. currency.

The currency of Africa’s biggest oil producer appreciated 0.1 percent in the interbank market to 162.50 per dollar as of 1:40 p.m. in Lagos, set for its biggest gain since June 25, according to data compiled by Bloomberg.

The Central Bank of Nigeria sold $251 million at a foreign- currency auction today at 155.90 naira per dollar, the Abuja- based bank said in an e-mailed statement. The oil industry, which sells dollars around the month-end to meet local expenses, is the second major supplier after the central bank.

The “central bank’s sales and anticipated month-end supply by oil companies,” are curtailing the weakening of the naira, Access Bank analysts led by Tony Monye and Michael Ndiomu wrote in note to clients today.

The central bank held the benchmark interest rate at 12 percent this year to curb the naira’s decline and combat inflation, after raising it 5.75 percentage points in 2011.

While inflation slowed to 12.7 percent in May from 12.9 percent in April, the rate is set to peak at 14.5 percent in the third quarter, the highest since April 2010, according to the central bank. Foreign-currency reserves, which rose 10 percent this year, retreated for an 18th straight day to $36.603 billion, according to the latest data from the central bank dated July 2.

The yield on Nigeria’s domestic 15.1 percent bonds due 2017 declined 20 basis points to 16 percent, according to July 3 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due 2021 rose one basis point to 5.5 percent today.