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Nigerian naira gains on NNPC dollar sales

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Wednesday February 15, 2012


Nigeria's naira strengthened both on the interbank market and at the central bank's foreign exchange window on Wednesday, supported by the sale of $425 million by state-owned energy company NNPC and two other oil firms to banks.

The naira closed at 158.40 to the dollar on the interbank, its strongest in almost three months compared to 158.60 a dollar close on Tuesday on improved dollar liquidity.

Traders said large dollar sales by NNPC, Italy's Agip and Brass LNG boosted dollar flows. NNPC sold about $400 million, Agip around $20 million, while Brass LNG sold half a million dollar to some lenders, traders said.

Africa's second biggest economy is reliant on the importation of both finished goods and other raw materials and a large appetite for dollars from importers often puts pressure on available foreign exchange.

The central bank sells dollars to banks twice a week at an auction to ease demand for foreign currency.

At Wednesday's auction, it sold $350 million at 156.40 to the dollar, compared with $250 million sold at 156.50 to the dollar at Monday's auction.

"Dollar liquidity in the market has tremendously increased in the last couple of weeks as a result of dollar sales by some multinational oil companies and NNPC (state-owned energy firm) and this has provided support for the naira," one dealer said.

Traders said the market was very liquid with most banks not willing to take long positions on the dollar and this is expected to sustain a stable outlook for the naira.

After falling by around 10 percent in the third and fourth quarters of last year, the local currency has gained back around half of that fall in the first six weeks of 2012, supported by a better mood towards riskier emerging markets.

Nigeria is Africa's biggest exporter of crude oil, which provides the country with 95 percent of its foreign exchange earnings, meaning oil prices above $100 dollar a barrel are also a strong support.


Source: Reuters (Reporting by Oludare Mayowa)


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