The naira pared its biggest loss since September after the Nigerian central bank sold the most dollars in 20 months at its regular auction today.
The Central Bank of Nigeria sold $500 million, the highest amount since Oct. 12, 2011, according to data on its website. The regulator auctions dollars on Mondays and Wednesdays to support the local currency. Foreign investors were said to exit Africa’s biggest oil producer, according to CSL Stockbrokers Ltd., boosting dollar demand that earlier weighed on the naira.
The currency traded less than 0.1 percent stronger at 159.38 per dollar by 2:57 p.m. in Lagos, the commercial capital, paring its earlier decline of as much as 2 percent.
“The central bank is signaling its willingness to defend the exchange rate amid less favorable external and market conditions,” Samir Gadio, an emerging-markets strategist with Standard Bank Group Ltd.’s London-based unit, said in e-mailed comments. “The pressure on the currency will persist in the absence of foreign capital inflows, and especially if there are further outflows.”
Federal Reserve Chairman Ben S. Bernanke said on June 19 the central bank may start reducing bond purchases this year and end the program known as quantitative easing in 2014 should risks to the U.S. economy abate. Bonny Light crude, Nigeria’s main export grade, fell 16 percent from this year’s peak of $120.54 per barrel reached on Feb. 8 to $101.61 today, a fourth day of declines.
“The naira is under pressure from a combination of falling oil production and portfolio outflows as foreign investors adjust their positions in light of Fed comments last week,” Alan Cameron, an analyst with CSL Stockbrokers in London, said in e-mailed comments.
Yields on Nigeria’s $500 million Eurobonds due January 2021 rose three basis points, or 0.03 percentage point, to 6.2 percent. Borrowing costs on local-currency debt due January 2022 fell 15 basis points to 13.85 percent on June 21, according to data compiled by Bloomberg.
Ghana’s cedi depreciated less than 0.1 percent to 2.0095 per dollar.