Wednesday, December 10, 2014 6:17 pm
Nigeria’s naira firmed 1.5 percent against the dollar on Wednesday after state-oil company NNPC sold around $200 million, coupled with a central bank intervention to boost interbank forex market liquidity, dealers said.
The naira closed at 179.90 in volatile trades, gaining some ground after it eased to an intraday low of 184.65 naira before the dollar sales. The naira closed at 182.60 to the dollar previous day.
The central bank has been struggling to keep the naira within a new target band of 160-176 against the dollar it set last month after it devalued the currency by 8 percent, to halt a decline to its foreign reserves.
But its foreign reserves fell to $35.95 billion by Dec. 8, down 19.3 percent from a year earlier as the bank stepped up its defence of the currency, latest figures from the bank’s website showed on Wednesday.
“As soon as the dollar liquidity dries out, we expect the naira to depreciate again unless the central bank intensifies intervention,” one dealer said.
Oil companies also sold dollars in addition to NNPC and central bank. Total sold $16 million, Brass LNG $12 million, while Shell sold an undisclosed amount, dealers said.
The NNPC accounts for the bulk of dollars traded on the interbank market as the state-oil company buys naira monthly in exchange for proceeds from the country’s oil receipts to help fund the government in Africa’s biggest economy.
Dealers said it would take up to two days for lenders to deliver naira to the NNPC, giving some relief to overnight lending rates, which have been under pressure with the central bank squeezing liquidity to support the currency.