Nigeria naira sustains rally as dollar demand falls
Monday February 20, 2012
The Nigerian naira sustained its rally against the U.S dollar on the interbank market on Monday as demand for the dollar fell at the central bank's bi-weekly auction.
The local currency closed at 157.60 to the dollar on the interbank, stronger than the 157.70 to the dollar Friday's closed.
At Monday's foreign exchange auction, the central bank sold $145.27 million at 156.10 to the dollar, less than the $250 million it initially offered. The regulator sold $350 million at 156.40 to the dollar at the previous auction on Wednesday.
Nigeria's central bank sells foreign exchange at a bi-weekly auction to importers and end-users through their banks and charges one percent commission on every dollar sold.
"The naira was cheaper at the interbank market than the central bank's effective rate at some point, so it does not make sense for customers to buy at the official window," one dealer said.
Traders said there was also a decline in dollar demand from fuel importers in the wake of a parliamentary probe into government spending on import subsidies.
"Fuel importers have drastically cut back on their dollar demand since the probe into discrepancy in fuel subsidy payment by government started, this has also help reduce pressure on the naira," another trader said.
Nigeria's parliament is investigating discrepancies in the amount of gasoline subsidy paid to importers against the actual amount brought into the country.
Increased dollar sales by local units of multinational oil companies and state-owned energy firm NNPC added to support for the naira.
Traders said with the prevailing increased dollar liquidity, expected month-end sales by some oil companies and subdued demand for hard currency, the naira should strengthen further in the coming days.