Naira Climbs, Paring Weekly Fall as Investors Buy Nigeria Debt

The naira strengthened, paring a weekly loss, as foreign investors brought dollars into the country to buy Nigerian debt after sales this week.

The currency of Africa’s biggest oil producer gained 0.2 percent at 157.2 against the dollar by 2:52 p.m. in Lagos, the commercial capital. The naira has depreciated less than 0.1 percent this week, according to data compiled by Bloomberg.

Central Bank of Nigeria Governor Lamido Sanusi said relative stability in the currency may be attributed to more foreign exchange from oil companies and investor inflows. The bank kept its benchmark interest rate unchanged at a record high 12 percent for an eighth monetary policy meeting on Jan. 21.

“This week we have again seen the strength of investor demand for naira debt instruments,” Gregory Kronsten and Olubunmi Asaolu, analysts at FBN Capital Ltd., wrote in an e- mailed note today. “Nigeria has become a favorite of the offshore fixed-income investor despite the yield compression of about 500 basis points on federal government naira bonds since August. We see another 100 basis points in the next three months, and single digits by year-end.”

Nigeria’s Debt Management Office sold 110 billion naira in bonds on Jan. 23, with yields on January 2022 notes declining to a record low of 11.34 percent. The central bank sold 164.8 billion naira of T-bills the same day, with demand at double the supply.

Slowing Inflation

The inflation rate will be slower in 2013 compared with last year and may be close to 10 percent in January, Sanusi said in an interview today at the World Economic Forum in Davos, Switzerland. Inflation in December eased to 12 percent, from 12.3 percent in the previous month, as the effects of flooding that damaged agricultural output last year began to subside.

The yield on Nigeria’s 16.39 percent domestic bonds due January 2022 rose seven basis points, or 0.07 percentage point, to 11.3 percent in the secondary market, according to Jan. 23 data on the Financial Markets Dealers Association website. Yesterday was a public holiday in Nigeria.

The yield on $500 million of Eurobonds due January 2021 was little changed at 3.765 percent today.

Ghana’s cedi strengthened 1.1 percent to 1.8915 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: Vernon Wessels at vwessels@bloomberg.net

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