Nigeria naira firms at interbank, forex reserves up

Forex
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Tuesday, October 18, 2011 4:33 PM

 

 

Nigeria's naira currency strengthened against the U.S dollar on Tuesday in the interbank market after the central bank offered to sell foreign exchange to lenders, although the regulator retracted the offer after the market close.

 

The local currency closed at 159.85 to the dollar at the interbank market on Tuesday compared to 162.80 naira a dollar Monday's close. Trading was limited as the market remained nervous over recent exchange rate volatility.

 

The naira fell to an all-time low last week before the central bank introduced several measures to tighten naira liquidity and release dollar supply, while also selling foreign exchange aggressively at auctions and directly into the market.

 

Traders said the central back offered to sell $200 million to some lenders in a special forex intervention aimed at supporting the local currency. The regulator later abandoned the sales, dealers said.

 

"We see the naira depreciating further tomorrow at the interbank because of the latest news that the central bank will no longer sell the $200 million again," one dealer said.

 

The regulator sold all the $296.91 million demanded at its bi-weekly forex auction on Monday at 149.95 naira to the dollar, strengthening the local currency from 150 to the dollar at the previous auction last week.

 

The central bank wants the naira to trade within 145.5-154.5/$ band but pressure on the local currency in the interbank market has led to calls for a adjustment of the channel, affectively a devaluation.

 

By selling foreign exchange at auctions the central bank is eating into reserves built up by the sale of Nigeria's oil. Reserves have not risen in the last year despite high oil prices and steady production.

 

Reserves in Africa's top crude exporter did rise sharply to $34.59 billion by Oct. 14, from a multi-year low of $30.86 billion on Oct. 7, the central bank latest figures showed. The reserves were at the same level a year ago.   

 

 

Source: Reuters (Reporting by Oludare Mayowa; Editing by Joe Brock)

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