Naira gains N3.40k on increased dollar supply

The nation’s currency, the naira, on Thursday gained N3.40k/$ or 1.9 percent against the US dollar at the inter-bank market following increased supply of the greenback by the Central Bank of Nigeria (CBN) and oil companies, BusinessDay learnt.

After trading on Thursday, the local currency closed at N179.60k/$ as against N183.00k/$ the previous day, according to data obtained from Financial Markets Dealers Quotations (FMDQ).

The CBN on Wednesday sold $451 million at its auction, the most since November 26, 2014. Oil companies offered about $200 million between January 5 and 7, Adebayo Omogoroye at Guaranty Trust Bank Plc told Bloomberg.

The naira has appreciated 2.2 percent this year, the most among 24 African currencies tracked by Bloomberg after the Somali shilling.

On Monday, naira began the new year with a gain of N1.00k against the US dollar at the inter-bank market, as the CBN resumed foreign exchange auction at the Retail Dutch Auction System (RDAS) after the festive holidays.

On Tuesday, the nation’s currency gained again against the US dollar by N1.52k/$ or 0.82 percent at the inter-bank market.

On Wednesday, the local currency strengthened by 0.32 percent or N0.58k/$ at the inter-bank market after the CBN’s intervention.

“There’s a lot more supply and demand is very thin,” Omogoroye, head of trading at the Lagos-based lender, told Bloomberg by phone. “The central bank was very strong in the auction.”
Buyers have been put off after a central bank announcement in December forcing them to use foreign exchange within 48 hours or sell it back to the institution. Demand was also hit by a ruling that banks clear foreign-exchange positions daily, having previously been allowed net-open positions of 1 percent of shareholder funds.
The central bank is reviewing this, Governor Godwin Emefiele said in an interview on January 6. His comments have helped to boost liquidity, according to Robert Hagenaars, a fixed-income trader at Zenith Bank U.K. Limited.