Dec. 5 (Bloomberg) -- The naira erased a decline against the dollar, heading for the biggest gain in almost two weeks, on speculation some oil companies sold the U.S. currency.
The currency of Africa’s biggest oil producer appreciated 0.1 percent, the most since Nov. 24 on a closing basis, to 161.35 per dollar on the interbank market by 4 p.m. in Lagos, after earlier retreating 0.1 percent, according to data compiled by Bloomberg.
“The interbank foreign exchange market is driven by dollar liquidity and information that oil companies sold dollars lifted the naira this afternoon,” Abubakar Mohammed, the managing director of Forward Marketing Communications Bureau De Change Ltd., based in Lagos, said today by phone.
The Central Bank of Nigeria on Nov. 21 lowered the midpoint of its exchange-rate band at its twice-weekly auctions to 155 naira per dollar from 150 naira. Rising imports and weakening oil prices, the source of more than 95 percent of Nigeria’s foreign-exchange income, mounted pressure on the bank.
Nigeria sold $200 million at a foreign-currency auction, less than the $229 million demanded by lenders, according to an e-mailed statement from Central Bank of Nigeria. The marginal rate, which is also used as the prevailing exchange rate, depreciated by 0.1 percent to 156.50 per dollar, compared with the previous auction on Nov. 30, the Abuja-based bank said. The last time lenders’ demand was met was Nov. 16.
“A lack of U.S. dollar liquidity will continue to precipitate naira losses, despite an upward adjustment of the mid-point,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, analysts at Rand Merchant Bank in Johannesburg, wrote in a report today. “The CBN’s regular involvement in the currency market outside of the official auctions has raised market expectations of consistent U.S. dollar supply, causing the naira to spike when the central bank is absent from the market.”
Inflation in Nigeria remains a threat, leaving little room to loosen monetary policy even as the European debt crisis worsens, Central Bank of Nigeria Governor Lamido Sanusi said Dec. 1.
The central bank kept its benchmark rate unchanged at a record high of 12 percent on Nov. 22 after having raised it by 6 percentage points since September last year. The bank increased interest rates 2.75 percentage points in October after inflation climbed above its 10 percent target.
Ghana’s cedi appreciated 0.2 percent to 1.6270 against the dollar, as of 4 p.m. in Accra.
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