Bloomberg News

Naira Strengthens to 9-Month High on Bank Regulation, Inflows

August 16, 2012

Nigeria’s naira rallied to the strongest in more than nine months as commercial lenders sold dollars to comply with regulations on foreign-exchange holdings and foreign investors bought the nation’s debt.

The currency of Africa’s biggest oil producer climbed as much as 0.6 percent to 156.32 a dollar, the highest on a closing basis since Oct. 25, 2011, and traded at 156.55 as of 1:21 p.m. in Lagos, the commercial capital, according to data compiled by Bloomberg. The naira has risen 3.4 percent this year, making it the best performing currency in Africa after the Zambian kwacha.

“The naira has been supported by a confluence of factors recently, including central bank’s restrictions at auctions, dollar sales from international oil companies and foreign inflows into fixed income markets,” Alan Cameron, analyst at London-based CSL Stockbroker Ltd., said today in an e-mailed response to questions. “The central bank is committed to keeping the naira stable at around current levels.”

The Central Bank of Nigeria last month reduced the amount of foreign exchange banks can hold as a percentage of their shareholders’ funds to 1 percent from 3 percent and increased their reserve requirements to 12 percent of total assets from 8 percent. Nigeria sold 75 billion naira ($478 million) of bonds at an auction yesterday, with bids at 249 billion naira, the Abuja-based Debt Management Office said today on its website.

Yields on the West African country’s 16 percent domestic debt due 2019 fell six basis points to 16.46 percent, according to August 15 prices on the Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due 2021 fell seven basis points to 4.994 percent today.

Ghana’s cedi strengthened 0.2 percent to 1.9415 a dollar 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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