Naira Snaps 5-Day Decline As CBN Intervenes

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The naira appreciated last Friday,? halting a five-day decline, as the Central Bank of Nigeria (CBN) was said to have sold dollars directly to the market outside of its regular currency auctions.

The currency of Africa’s biggest oil producer rose as much as 0.9 per cent and traded 0.6 per cent stronger at 158.65 per dollar, its biggest gain on a closing basis since October 4. The naira has dropped 1.5 per cent this year, according to data compiled by Bloomberg.

“There was intervention from the central bank,” Tega Adeda, a foreign-exchange trader at Stanbic IBTC Holding Co. (STANBIC), told Bloomberg by phone from Lagos, without specifying the amount sold. “There was a lot of corporate demand” and the regulator is trying to stabilise the market, he said. Ugochukwu Okoroafor, a spokesman for the CBN, didn’t answer four calls made to his mobile phones seeking comment.

The bank reduced dollar sales to lenders by six per cent this week to $360 million. The regulator uses the twice-a-week auctions to stabilise the naira as costs of importing refined fuel, which accounts for 70 per cent of the local gasoline market, boosts dollar demand and puts pressure on the currency, according to the central bank.

At the auctions, “demand appeared to have been higher,” Ridle Markus and Dumisani Ngwenya, African strategists at Barclays Plc’s Absa Capital, Johannesburg, wrote in a note to clients. “Yet, with significantly improved external buffers, ongoing tight monetary policy and continued oil inflows amid relatively stable production and oil prices, we expect the naira to remain supported in the short term,” he explained.

The Monetary Policy Committee, led by Lamido Sanusi, will hold its policy rate at 12 per cent for a ninth consecutive meeting on March 18 and 19, according to eight economists surveyed by Bloomberg News.

The central bank held the rate at the record level on Jan. 21 to control consumer prices and maintain the naira’s level. Inflation eased to nine per cent in January from 12 per cent in December, the statistics bureau said last month.

Borrowing costs on the country’s 16.39 per cent domestic bonds due January 2022 rose nine basis points to 11.27 per cent, according to data compiled on the Financial Markets Dealers Association website.

Yields on the nation’s $500 million of Eurobonds due January 2021 fell two basis points to 4.204 per cent.

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