Bloomberg News

Naira Gains Most in Three Weeks After Central Bank’s Dollar Sale

May 21, 2012

The naira strengthened the most in almost three weeks after the central bank sold dollars at an auction today as reserves increased.

The currency of Africa’s largest oil producer appreciated 0.1 percent to 158.875 per dollar as of 4:34 p.m. in Lagos, its biggest gain on a closing basis since May 2.

Nigeria sold $150 million at a foreign-currency auction today, with lenders buying the entire amount on sale, the Abuja- based Central Bank of Nigeria said in an e-mailed statement. The regulator offers dollars at twice-weekly auctions and on the interbank market to support the naira by using reserves. The country’s foreign-exchange reserves have gained 13 percent this year to 37.2 billion by May 17, data from the central bank show.

“We expect to see relative stability of the naira as the central bank intervenes at the auctions and interbank market on the back of growth in foreign-exchange reserves,” analysts at Lagos-based Cowry Asset Management Ltd., led by Edgar Ebinum, wrote in an e-mailed note to clients today.

The nation’s bonny light crude traded at $109.30 a barrel, down from more than $128 in March, according to data compiled by Bloomberg. That compares with Nigeria’s $72 budget benchmark for 2012.

“The risk is obviously that a further decline in the oil price leads to a deterioration in domestic confidence in the naira and incremental dollar demand, but we are not there yet since the Bonny Light is still trading in excess of $100 per barrel,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed response to questions from Bloomberg. “The central bank will likely keep rates on hold tomorrow.”

Rate Decision

Nigeria’s central bank will announce a rate decision tomorrow. The lender raised its policy rate to a record 12 percent in October to check inflation and stabilize the naira.

Inflation in the West African country accelerated to 12.9 percent in April, the fastest since October 2010, from 12.1 percent in March, the National Bureau of Statistics said May 15.

The yield on Nigeria’s domestic bonds due 2015 fell two basis points to 15.28 percent, according to the May 21 data on the Financial Markets Dealers Association website. Yields on Nigerian Eurobonds due 2021 fell four basis points to 5.910 percent in London.

Ghana’s cedi weakened 0.8 percent to 1.9050 per dollar as of 3:42 pm in Accra, the capital.

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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