Naira Rises to 5-Week High on Oil Company Dollar Sales, Auction

Nigeria’s naira appreciated for the second day against the dollar, strengthening to a five-week high, on sales from oil companies after the central bank auctioned the U.S. currency today.

The currency of Africa’s biggest oil producer advanced 0.7 percent to 159.80 per dollar on the interbank market as of 4:41 p.m. in Lagos, the commercial capital, heading for the highest level since Dec. 20, according to data compiled by Bloomberg. The Central Bank of Nigeria sold $250 million at a twice-weekly auction today, with the marginal rate, also used as the prevailing exchange rate, stronger by 0.1 percent to 156.85 naira compared with 157 naira at a previous sale on Jan. 23, Abuja-based bank said.

“Oil companies sold an undisclosed amount of dollars to some banks, which complemented the supply by the central bank,” Tunde Ladipo, chief executive officer of Valuechain Investment Ltd., which trades currencies, said by phone today. “The sales are helping to reduce pressure on the naira arising from limited transactions during the general workers’ strike.”

Labor unions in Africa’s biggest oil producer began a nationwide strike on Jan. 9, which limited trading in currencies, shut banks, businesses and ports after the government scrapped fuel subsidies on Jan. 1. Gasoline prices more than doubled from 65 naira ($0.40) a liter after cutbacks were announced. The workers suspended industrial action on Jan. 16 after President Goodluck Jonathan restricted gasoline-price increases to 97 naira a liter.

“The government’s plan to eliminate fuel subsidies would have helped relieve some of the pressures on foreign exchange market by reducing demand related to leakages,” Gregory Kronsten and Olubunmi Asaolu, analysts at Lagos-based FBN Capital, said in an e-mailed note to clients today. “However, given that the government only succeeded partially with this objective, the pressure on the naira remains,” and the central bank “continues to withhold information on bids at its auctions.”

Ghana’s cedi appreciated 0.3 percent to 1.7005 per dollar, according to data compiled by Bloomberg.

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