Bloomberg News

Naira Rises to 16-Week High on Low Dollar Demand, Auction Sale

February 22, 2012

Feb. 22 (Bloomberg) -- Nigeria’s naira appreciated to its strongest level in sixteen weeks on lower demand for the dollar as the central bank sold the U.S. currency at a twice-weekly auction.

The currency of Africa’s largest oil producer appreciated 0.2 percent to 157.36 naira per dollar as of 4:50 p. m. in Lagos, its strongest since Nov. 3, according to data compiled by Bloomberg.

Nigeria sold $113.5 million at a foreign-currency auction today, less than $150 million it put on offer, the Abuja-based Central Bank of Nigeria said in an e-mailed statement. The marginal rate, which is also used as the prevailing exchange rate strengthened 0.1 percent to 155.90 naira, compared with 156.10 naira at the previous sale on Feb. 20, it said.

The central bank’s dollar supply is “coming at a time of limited demand and has added support to the naira,” Sewa Wusa, currency analyst at Lagos-based Sterling Capital, said by phone.

Government probes into the authenticity of certain fuel subsidy payments have lowered dollar demand and are “regarded as the catalysts for the appreciation of the naira,” Ridle Markus, Dumisani Ngwenya and Mike Keenan, Johannesburg-based Africa analysts at Absa Capital, wrote in a note to clients today.

Fuel Probes

Nigeria’s parliament is probing whether fraudulent practices by government agencies fueled a fivefold rise in spending on gasoline subsidies in the past three years. Fuel imports have been a large source of pressure on Nigeria’s foreign-currency market and demand for foreign currency to fund fuel imports has eased, central bank Deputy Governor Tunde Lemo told a committee at a public hearing on Feb. 7.

The Central Bank of Nigeria offers dollars at auctions on Mondays and Wednesdays and through interbank trading to maintain exchange rate stability. The oil industry is the second major source of dollar supplies in the country.

The central bank kept its benchmark interest rate unchanged at a record high for a second consecutive meeting on Jan. 31 to curb inflation after the government partially removed fuel subsidies, boosting gasoline costs.

Annual inflation rate in Nigeria jumped to 12.6 percent in January from 10.3 percent a month earlier, the National Bureau of Statistics said Feb. 20. It has increased from 9.3 percent in August, the lowest since May 2008.

Ghana’s cedi depreciated by 0.6 percent at 1.7115 per dollar, as of 4:40 p.m. in Accra, the nation’s capital.

--Editors: Peter Branton, Ash Kumar

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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