The naira retreated against the dollar, paring a weekly gain, amid speculation that companies and traders took advantage of favorable rates as the Nigerian currency benefited from inflows into bonds.
The currency of Africa’s biggest oil producer fell 0.1 percent to 156.3 a dollar as of 2:43 p.m. in Lagos, the commercial capital, paring its gain to 0.2 percent this week. The naira advanced 3.9 percent last year, the strongest performance of African currencies tracked by Bloomberg.
“The naira has been strongly supported by continued capital flows into fixed income instruments during this week’s primary T-bill auction and in the secondary bond market,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed reply to questions. “It is normal that some market players or corporates may want to take advantage of the attractive rates.”
T-bill yields fell to the lowest in 15 months at a central bank auction on Jan. 9, as bids were more than double the amount on sale amid speculation that inflation and interest rates will retreat this year.
While Nigeria’s inflation rate rose for a second month in November to 12.3 percent as the worst floods in decades cut farming output, pricing pressures should ease early this year as the impact from the flooding diminishes, central bank Governor Lamido Sanusi said on Nov. 20. He left the benchmark interest rate unchanged at 12 percent.
“The dollar-naira rate is likely to perform well in coming weeks on sustained capital inflows, foreign-exchange sales from oil companies and limited dollar demand,” said Gadio.
JPMorgan Chase & Co. added the West African nation’s bonds to its benchmark emerging-market index series in October, predicting the inclusion may lure $1.5 billion to sub-Saharan Africa’s second-largest economy. Barclays Plc said it will follow from March for its own local-currency index.
Yields on 10-year naira debt fell four basis points to 11.34 percent in the secondary market, according to yesterday’s prices compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 declined one basis point to 3.79 percent today, a drop of 16 basis points this week.
Ghana’s cedi declined 0.4 percent to 1.8955 per dollar in Accra, the capital, unchanged for the week.
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