The naira gained against the dollar, snapping two days of declines, after Central Bank of Nigeria Governor Lamido Sanusi said monetary policy tightening had been “very effective” in keeping the currency stable.
The currency of Africa’s biggest oil producer rose 0.3 percent to 157.875 a dollar as of 2:20 p.m. in Lagos, the commercial capital. The naira has advanced 2.8 percent this year, the second-best performance in Africa, according to data compiled by Bloomberg.
Sanusi has tried to support the naira and control inflation by increasing the amount of cash commercial lenders must hold with the central bank to 12 percent from 8 percent on July 24, while keeping the benchmark interest rate at a record high of 12 percent. The regulator restricted access to its twice-a-week foreign-exchange auctions on Aug. 1, preventing dealers from buying foreign currency using naira purchased at a discount through the central bank’s standing lending window and repurchase facility.
“The tightening of monetary policy has been very effective in terms of keeping the exchange rate fairly within the band,” which damps down the impact of imported inflation, Sanusi told reporters yesterday in Abuja, the capital. The bank sells foreign currency at twice-a-week auctions to keep the naira within a 3 percent band around 155 per dollar.
Inflation may peak this month or in September before declining toward the end of the year, said Sanusi. The central bank previously forecast it would reach as high as 14.5 percent in the third quarter after the government partially removed a fuel subsidy in January.
“Although inflation may yet increase slightly from its current levels, the decline in the month-on-month figures, and the increased stability in the naira currency, bode very well for lower inflation figures ahead,” Thalma Corbett, chief economist at NKC Independent Economists in Paarl, South Africa, wrote in an e-mailed note today.
Yields on the West African nation’s 16 percent domestic debt due 2019 rose three basis points, or 0.03 percentage point, to 16.43 percent, according to yesterday’s prices on the Financial Markets Dealers Association website. Borrowing costs on the West African nation’s $500 million of Eurobonds due 2021 declined four basis points to 4.86 percent today.
Ghana’s cedi gained for a fourth day, adding 0.5 percent to 1.9295 a dollar in Accra, the capital.