Bloomberg News

Naira Gains for Second Day on Oil Company Dollar Sales, Auction

January 26, 2012

Jan. 25 (Bloomberg) -- Nigeria’s naira appreciated for the second day against the dollar on demand from oil companies and amid speculation that the central bank will clear unmet demand at an auction today.

The currency of Africa’s biggest oil producer advanced 0.6 percent to 159.90 per dollar on the interbank market as of 12:02 p.m. in Lagos, the commercial capital, headed for the highest level since Jan. 5, according to data compiled by Bloomberg. The Central Bank of Nigeria, based in the capital, Abuja, is scheduled to sell dollars today at a twice-weekly auction.

“Oil companies are selling dollars for naira to make their local purchases, which is common by the month-end,” Tunde Ladipo, chief executive officer of Valuechain Investment Ltd., which trades currencies, said by phone today. “The central bank is expected to raise sales at its currency auction today to help cover demand that piled up during the workers’ strike, which is necessary to stabilise the market for the new year.”

Labor unions in Africa’s biggest oil producer began a nationwide strike on Jan. 9, which limited trading in currencies, shut banks, businesses and ports after the government scrapped fuel subsidies on Jan. 1. Gasoline prices more than doubled from 65 naira ($0.40) a liter after cutbacks were announced. The workers suspended industrial action on Jan. 16 after President Goodluck Jonathan restricted gasoline-price increases to 97 naira a liter.

“The government’s plan to eliminate fuel subsidies would have helped relieve some of the pressures on foreign exchange market by reducing demand related to leakages,” Gregory Kronsten and Olubunmi Asaolu, analysts at Lagos-based FBN Capital, said in an e-mailed note to clients today. “However, given that the government only succeeded partially with this objective, the pressure on the naira remains,” and the central bank “continues to withhold information on bids at its auctions.”

Nigeria’s central bank sold $250 million at a twice-weekly auction on Jan. 23, with the marginal rate, also used as the prevailing exchange rate, down by 0.1 percent to 157 naira compared with 156.85 naira at a previous sale on Jan. 18, the bank said.

Ghana’s cedi appreciated 0.6 percent to 1.7005 per dollar, as of 11:06 a.m. in Accra, the capital, according to data compiled by Bloomberg.

--Editors: Peter Branton, Alex Nicholson

To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net


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