Bloomberg News

Naira Gains on Inflows After Bank Holds Record Interest Rate

November 21, 2012

Nigeria’s naira strengthened on inflows for purchases of fixed-income securities after the central bank held its benchmark interest rate at a record high yesterday to check inflation and stabilize the local currency.

The currency of Africa’s biggest oil producer gained 0.2 percent to 157.65 a dollar at 4 p.m. in Lagos, the commercial capital, after weakening 0.1 percent yesterday. The naira has appreciated 3 percent this year, the second-best performing currency tracked by Bloomberg in Africa.

Nigeria is scheduled to sell 50 billion naira ($316.6 million) of 10-year and 7-year bonds today and is offering 116.18 billion naira of Treasury bills tomorrow. The Central Bank of Nigeria left its interest rate unchanged at 12 percent yesterday. Inflation, which accelerated for the first time in four months to 11.7 percent in October on widespread flooding of farms, is still above the bank’s target of less than 10 percent.

“Nigerian bond yields remain attractive to offshore investors, with the inflows boosting dollar supply,” Wale Abe, chief executive officer of the Financial Market Dealers Association, which groups lenders trading in the money market, said by phone today. “An interest rate of 12 percent will check excess money supply and demand for dollars.” stability, and is in no hurry to abandon it.”

The central bank sold $200 million at a foreign currency auction today at 155.76 naira per dollar, it said in a statement on its website. The regulator sells dollars on Mondays and Wednesdays to keep the naira within a 3 percent band around 155 a dollar.

The naira’s appreciation could be traced to tight monetary conditions, improved supply of foreign exchange to the market by oil companies and increased inflows from portfolio investors, central bank Governor Lamido Sanusi said yesterday.

Foreign Reserves

The nation’s foreign-currency reserves have risen 32 percent this year to $43.45 billion as of Nov. 16, according to data on the central bank’s website.

Nigeria’s credit rating was raised one level to BB- on higher reserves and on reforms of key economic sectors, Standard & Poor’s said Nov. 8.

Yields on 10-year naira debt fell 17 basis points to 12.29 percent, according to yesterday’s prices compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 declined seven basis points to 4.3 percent today.

Ghana’s cedi weakened 0.1 percent to 1.8913 per dollar in Accra, the capital.

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


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