Oct. 31 (Bloomberg) -- Nigeria’s naira rallied for a second day against the dollar, heading for its first monthly gain in four, after the central bank raised interest rates in October and signaled it may take more steps to stabilize the currency.
The currency of Africa’s top oil producer climbed 0.2 percent to 159.395 per dollar by 3 p.m. in the interbank market, heading for a monthly rise of 0.2 percent, according to data compiled by Bloomberg.
The Abuja-based Central Bank of Nigeria raised its benchmark interest rate by 2.75 percentage points to a record 12 percent on Oct. 10 to help boost the naira and curb price pressures. The bank plans “to either buy or sell” dollars to banks “from time to time” in addition to its twice-weekly auctions and weekly forward trading, the regulator said Oct. 21.
“The measures that CBN has put in place have started to yield results as the value of the naira has entered a stable region,” analysts at Lagos-based First Securities Discount House Ltd. wrote in a report today.
Nigeria may lower its official target for the naira to 155- 156 per dollar and aim to keep it stable around that level over the next year, central bank Governor, Lamido Sanusi said today. The bank will make its stance on the currency clear in the next week or two, he said.
Mounting demand for dollars had pushed the naira outside a 3 percentage-point band above 150 per dollar targeted by the central bank, with the currency weakening to a record 166.6 per dollar on Oct. 10.
Nigeria sold $200 million at a foreign-currency auction, less than the $252.3 million demanded by lenders. The marginal rate, which is also used as the prevailing exchange rate, depreciated 0.1 percent to 150.25 per dollar, compared with 150.05 naira at the previous auction on Oct. 26, the Abuja-based Central Bank of Nigeria said in e-mailed statement.
“The naira weakened at the auction due to the inability of central bank to meet demand,” Abubakar Mohammed, managing director of Forward Marketing Communications Bureau de Change, based in Lagos, said by phone today.
The Ghanaian cedi depreciated for the third day to 1.5893 per dollar, as of 3 p.m. in Accra, according to data compiled by Bloomberg.
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