Naira Gains as Inflows Expected After Addition to Bond Index

Nigeria’s naira gained against the dollar on the interbank market on bets that the inclusion of the nation’s bonds into JPMorgan Chase & Co. index series will spur foreign currency inflows.

The currency of Africa’s biggest oil producer rose 0.1 percent to 157.1375 a dollar at 4:47 p.m. in Lagos, the commercial capital. The naira has advanced 3.3 percent this year, the best performer in Africa, according to data compiled by Bloomberg.

The most-traded bonds maturing in March 2014, October 2019 and January 2022 will join JPMorgan’s GBI-EM indexes between Oct. 1 and Dec. 3, Giulia Pellegrini, the bank’s London-based sub-Saharan Africa economist, wrote in a note to clients Sept. 25.

JPMorgan first disclosed the plans in August after central bank Governor Lamido Sanusi’s decision last year to attract more funds by removing restrictions on foreign investors holding the West African country’s debt.

Nigeria’s inclusion “has enhanced offshore participation in local debt markets, enlarging the pool of U.S. dollars to local players,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, Africa strategists at Rand Merchant Bank in Johannesburg, wrote in a report today. The naira is “likely to remain suspended below 158 over the next few days.”

The Central Bank of Nigeria sold $104.9 million at its first of two regular twice-a-week foreign-currency auctions, with lenders buying less than the $150 million on offer, the Abuja-based regulator said in a statement on its website. The marginal rate was 155.75 naira, compared with 155.77 naira at the previous Oct. 3 sale.

The yield on Nigeria’s 10.5 percent domestic bonds due March 2014 declined six basis points to 11.62 percent, according to Oct. 5 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due January 2021 fell three basis points to 4.77 percent today.

Ghana’s cedi rose 0.2 percent to 1.8905 a dollar in Accra, the capital.

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net

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