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Nigerian naira gains on offshore dollar inflows

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Wednesday February 22, 2012

The Nigerian naira strengthened further against the U.S dollar on both the interbank market and official forex window on Wednesday, supported by dollar inflows from oil company sales and offshore interest in treasury bills.

The naira closed at 157.45 to the dollar at the interbank, firmer than the 157.60 naira to the dollar it had reached on Tuesday, as more dollar inflows boosted liquidity in the system and outweighed dollar demand from importers.

Traders said Addax oil sold about $9 million to some banks, while inflows from offshore investors into treasury bills further boosted dollar supply and to sustain the naira rally.

The local currency has gained around 2.47 percent against the U.S dollar this month on the interbank market.

On the bi-weekly forex auction, the central bank sold $113.53 million at 155.90 naira to the dollar, compared with $145.27 million sold at 156.10 naira to the dollar at the previous auction on Monday. For the second time in a row, the regulator sold fewer dollars than it initially offered.

Traders said this was a sign of weak demand from importers and other end-users, as a result of the convergence of rates between the official window and the interbank market.

"Importers now prefer to buy the dollar at the interbank market than queue for the same thing at the central bank's auction," one dealer said.

More local units of oil multinational companies are expected to sell dollars in the coming days, which would further strengthen the naira. Most of the oil companies usually sell dollars to banks on a monthly basis to obtain local currency.

"We see the naira appreciating further in the coming days as more oil companies off-load their month-end dollar sales into the market," one dealer said.

A total of about 149.65 billion naira ($949.86 million) was offered for sale at Wednesday's treasury bill auction by the central bank, traders said.



Source: Reuters (Reporting by Oludare Mayowa)

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