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Nigeria’s Naira Heads for Highest in Three Weeks on Inflows, Oil

Oct. 30 (Bloomberg) -- Nigeria’s naira headed for its highest level in three weeks on speculation of increased portfolio inflows and dollar sales by oil companies.

The naira strengthened less than 0.1 percent to 156.975 a dollar by 2:22 p.m. in Lagos, the commercial capital, and is poised for the highest close since Oct. 8. The currency of Africa’s largest oil producer has increased 3.4 percent this year, the second-best performer on the continent, according to data compiled by Bloomberg.

“The trend in naira strengthening since mid-June mainly reflects robust capital inflows seeking to buy high-yielding government securities,” Ecobank Transnational Inc. strategists, led by Paul-Harry Aithnard in Paris, wrote in a note to clients today. The naira is also receiving some support from “dollar supplies by oil companies,” the strategists wrote.

Borrowing costs for Nigeria’s federal government dropped after JPMorgan Chase & Co. announced in August that it will add the country’s bonds to its GBI-EM index series from Oct. 1. The yield on the 16.39 percent naira debt due 2022 has fallen 280 basis points to 13.33 percent since the start of August, according to yesterday’s prices compiled by the Lagos-based Financial Markets Dealers Association.

The yield on the nation’s $500 million of Eurobonds due January 2021 declined less than 1 basis point to 4.56 percent today.

Reserve Requirements

The central bank, led by Governor Lamido Sanusi, has left the benchmark interest rate unchanged at a record 12 percent this year. The regulator increased reserve requirements for banks to 12 percent of assets from 8 percent after its monetary policy committee meeting on July 24. A week later, it limited access to twice-a-week foreign-exchange auctions to stop dealers from buying foreign currency using naira purchased from the central bank at a discount.

Nigeria’s foreign reserves increased 28 percent this year to $42.2 billion by Oct. 23, according to data compiled by the Central Bank of Nigeria. The West African nation’s benchmark Bonny Light crude has advanced 22 percent to $110.08 a barrel since hitting its lowest this year in June.

Ghana’s cedi slipped 0.1 percent to 1.8799 a dollar in Accra, the capital.

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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