Naira Rallies on Central Bank Support: Lagos Mover

The naira strengthened, set for a third weekly gain against the dollar, as the Central Bank of Nigeria tightened control of foreign-currency sales at its regular auctions.

The currency of Africa’s biggest crude producer advanced 1 percent to 159.79 by 3:02 p.m. in Lagos, the commercial capital, after the Abuja-based central bank said it was suspending wholesale dollar auctions in a notice published on its website yesterday. The currency has gained 0.7 percent this week as Governor Lamido Sanusi pledged to use foreign-currency reserves to support the naira when needed.

The bank wants “to ensure that people will not buy dollars and stockpile them,” Sewa Wusu, an analyst at Sterling Capital Ltd., said by phone from Lagos. “They want to ensure that the demand for the dollar is used.”

The central bank sells foreign currency at twice-weekly auctions to keep the naira within a range of 3 percentage points above or below 155 per dollar. Wholesale auctions saw lenders bid for dollars without saying what the money be used for, Wusu said. The retail auctions now require that information, and the bank “reserves the right to reject bids that are deemed to be unrealistic,” according to the statement. The changes take effect Oct. 2.

“The excess demand for the naira in the auction will be reduced, because the banks will not be taking position, only the end-users,” Bismarck Rewane, chief executive officer at Financial Derivatives Co., said by phone from Lagos.

The Sanusi-led Monetary Policy Committee held Nigeria’s benchmark lending rate at a record high 12 percent on Sept. 24.

“We’re committed to the stability of the exchange rate and we’ll not, unless we’re forced to, allow the naira to weaken,” the governor said that day.

The naira weakened 2.4 percent this year against the dollar. The central bank sold $600.2 million at foreign-currency auctions this week from $600 million in the prior five days. Nigeria’s gross reserves fell to $45.7 billion as of Sept. 25, compared with $46.9 billion at the end of August.

(Corrects range that central bank targets for naira in fourth paragraph of story published on Sept. 27.)
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