Nigeria’s naira currency strengthened against the dollar on the interbank market on Wednesday, after the state-owned energy company sold an disclosed amount of dollars and the central bank raised dollar supply at its official window.
|Nigerian energy firm|
The local unit closed at 160.05 to the dollar, firmer than the 160.6 to the dollar it closed at the previous day.
Traders said the central bank raised supply at its twice-weekly foreign exchange auction to $400 million on Wednesday, in a bid to clear backlog of demand and shore up the naira, but it sold only $300.15 million of it at 155.75 to the dollar.
“The big push for the naira came from dollar sales by the NNPC, which took it to 159.2 to the dollar level intraday before it closed at 160.05, as some importers took advantage of the appreciation to cover their positions,” one dealer said.
The state oil firm, or NNPC, is the biggest source of dollars to Nigeria’s currency markets.
The naira has been under pressure from strong demand from importers and offshore investors exiting the local bond market, but it recovered somewhat since last week when the U.S. Federal Reserve suggested it may wait before scaling back bond buying.
During a bi-monthly committee meeting on interest rates on Tuesday, Central bank Governor Lamido Sanusi pledged to use foreign exchange reserves to defend the naira, reiterating that there would be no devaluation of the local unit.
He also raised the alarm about a surge in dollar demand linked to political activities ahead of 2015 elections, which he suggested carry a high risk of money laundering.
Traders expected the naira to be stable around the 160-160.5 level in the near term as more oil companies buy local currency to meet their month-end domestic obligations.