Bloomberg News

Naira Pares Worst Week in 5 Months on Bets CBN Selling Dollars

May 18, 2012

Nigeria’s naira rose for the first time in six days, paring its worst week this year, on speculation the Central Bank of Nigeria sold dollars.

The currency of Africa’s largest oil producer advanced 0.3 percent to 158.6 per dollar as of 3 p.m. in Lagos, the commercial capital. The gain trimmed the naira’s retreat this week to 0.5 percent, the biggest drop since a similar period ended Dec. 23.

The central bank, which sold $200 million at its second weekly auction May 16, intervened in the market today outside of its scheduled sales to prop up the currency, Access Bank Plc’s treasury department said in an e-mail. Ugochukwu Okoroafor, a spokesman for the Abuja-based regulator, didn’t answer a call to his mobile phone.

The naira “has come under pressure this week,” Samir Gadio, an emerging markets strategist at Standard Bank Group Ltd. in London, wrote in a note to clients today. “The CBN has proactively intervened to contain the depreciation” this week, he said.

The central bank is the main supplier of foreign currency to the market through twice-weekly auctions and direct sales to lenders in the interbank market. The sale two days ago was the biggest since an auction on March 21.

Oil, Nigeria’s main export, headed for its third weekly decline in New York after Germany’s finance minister said Europe’s crisis may last another two years and reports added to evidence of a slowdown in China. Brent fell to its lowest this year in London.

Bonds Fall

Yields on Nigeria’s $500 million of dollar bonds due 2021 jumped 10 basis points to 5.947 percent, the highest since February, heading for the worst week since September. Borrowing costs on naira bonds due 2019 rose three basis points to 15.45 percent, according to May 17 data compiled by the Financial Markets Dealers Association.

“We have detected some concern among offshore investors in naira debt about the exchange rate in the light of oil price softness,” Gregory Kronsten, head of macroeconomic research at FBN Capital Ltd. in London, wrote in a e-mailed note today.

Greece had its credit downgraded by Fitch Ratings on concern the politically deadlocked country may not be able to sustain euro membership. The nation is scheduled to hold fresh elections on June 17.

“Given the risks of heightened uncertainty and volatility ahead of the Greek elections, we think it is appropriate to turn more defensive on EM assets, avoiding higher beta assets,” Barclays Capital strategists, including Koon Chow, Piotr Chwiejczak and Andreas Kolbe, wrote in a report.

Ghana’s cedi was unchanged at 1.905 per dollar in Accra, the capital.

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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