Nigeria’s naira strengthened for a third day as oil producers sold dollars to fund operations in the West African nation and after the government sold bills.
The currency of Africa’s biggest oil producer advanced as much as 0.9 percent to 158.60 per dollar, the strongest level in more than a week, before trading 0.5 percent higher at 159.15 on the interbank market at 12:30 p.m. in Lagos, the commercial capital, according to data compiled by Bloomberg.
The naira has gained 0.7 percent this week, set for its second weekly advance, after the government sold 149.3 billion naira ($938 million) of three-, six- and 12-month bills. Lower demand for dollars by importers after cutbacks in fuel subsidies also buoyed the currency, according to the central bank.
“The stronger naira reflects a combination of factors, including foreign-exchange sales from oil companies as well as some inflows from offshore accounts to fund their T-bill purchases,” Samir Gadio, an emerging markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed reply to questions today.
President Goodluck Jonathan backtracked on an earlier decision to scrap a fuel subsidy in Nigeria after gasoline costs more than doubled, prompting protests and strikes. He has not reinstated the subsidy to levels that existed prior to the withdrawal, agreeing only to a partial reduction. Gasoline prices in Africa’s most populous country surged by almost 50 percent last month, stoking inflation which touched 10.3 percent in December.
“We have seen a moderation in the demand for foreign exchange perhaps especially from the petroleum sector,” central bank Deputy Governor Tunde Lemo told a public hearing of a House of Representatives committee investigating fuel subsidy discrepancies Feb. 7 in Abuja, the capital.
The nation’s foreign-exchange reserves increased 5.5 percent this year to $34.7 billion as of Feb. 2, according to central bank data. Nigeria’s central bank offers foreign currency to lenders at twice-weekly auctions and also sells dollars directly to banks through the interbank market by dipping into reserves, as it tries to keep the exchange rate around a midpoint of 155 naira per dollar and stabilize prices.
Ghana’s cedi weakened 0.6 percent to 1.6979 per dollar, according to data compiled by Bloomberg.