Nigeria’s naira strengthened for a second day after the central bank kept its benchmark interest rate at a record high yesterday to support the currency and control inflation.
The currency of Africa’s biggest oil producer gained less than 0.1 percent to 157.6 against the dollar as of 3:30 p.m. on the interbank market in Lagos. The naira has appreciated 3 percent this year, the best performer among 23 currencies tracked by Bloomberg in Africa.
The Central Bank of Nigeria kept its key rate unchanged at 12 percent in a unanimous decision, Governor Lamido Sanusi said yesterday. The inflation rate declined to 11.7 percent in August from 12.8 percent a month earlier, the Abuja-based National Bureau of Statistics said Sept. 16. It’s still above the central bank’s target of under 10 percent.
“The CBN maintains its objective of relative exchange-rate stability, which, it argues, helps to deliver price stability, and is valued by Nigerian business and foreign investors,” Gregory Kronsten, head of economic research at FBN Capital Ltd. in London, wrote in an e-mailed note today. “The CBN will be able to hold the line on the exchange rate” and keep it within the target range of 3 percent above or below 155 a dollar at its twice-weekly currency auctions “well into 2013,” he said.
The central bank sold $179 million at a foreign-currency auction today, compared to $180 million at the previous sale on Sept. 17, at a marginal rate of 155.78 naira a dollar, the Abuja-based bank said in an e-mailed statement.
The regulator kept the amount of foreign currency banks may hold as a percentage of their shareholders’ funds at 1 percent and held the amount of cash as a percentage of deposits that commercial banks must hold with the central bank at 12 percent, the central bank’s Sanusi said.
“We do not anticipate further monetary policy adjustments this year as core inflationary pressures are likely to prevent the CBN from cutting interest rates to stimulate demand-side growth,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, strategists at Rand Merchant Bank, wrote in a report today.
The West African nation’s foreign-currency reserves rose to a more than two-year high of $40.568 billion on Sept. 14, according to data compiled by the central bank.
The yield on Nigeria’s 16 percent domestic bonds due June 2019 rose 25 basis points to 12.04 percent, according to yesterday’s data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due January 2021 fell two basis points to 4.77 percent.
Ghana’s cedi weakened for a fourth day, dropping 0.4 percent to 1.9105 a dollar in Accra, the capital, its biggest decline since July 11.