Nigeria’s Naira Weakens to 3-Week Low After Bank Cuts Sale

Emele Onu - Bloomberg, February 13, 2013

Nigeria’s naira retreated to a three-week low after the central bank cut dollar supply at an auction today.

The currency of Africa’s largest oil producer retreated less than 0.1 percent to 157.37 per dollar by 4.35 p.m. in Lagos, the commercial capital, its weakest since Jan. 24, according to data compiled by Bloomberg.

The Central Bank of Nigeria sold $120 million at a foreign exchange auction today, compared with $180 million at the previous sale on Feb. 11, the Abuja-based bank said in an e- mailed statement. The regulator, which sells dollars on Mondays and Wednesdays to stabilize the naira, is the major supplier of foreign exchange.

“Reduction in official dollar supply increases the recourse to the interbank market for dollars,” Tunde Ladipo, chief executive officer of Lagos-based Valuechain Investment Ltd., said by phone today. “Oil company sales have also declined, adding to pressure.”

Oil companies, which sell dollars to lenders at the end of the month to meet local spending needs, are the second-biggest source of foreign currency.

The yield on the country’s 16.39 percent domestic bonds due January 2022 fell one basis point to 10.87 percent in the secondary market, according to yesterday’s data on the Financial Markets Dealers Association website.

The yield on $500 million of Eurobonds due January 2021 rose two basis points to 4.309 percent today.

Ghana’s cedi gained by 0.2 percent to 1.9050 a dollar in Accra.