NAIRA HITS 18-DAY HIGH ON NNPC DOLLAR SALES

Filed in Bank & Finance by on January 23, 2012

Naira hits 18-day high on NNPC dollar sales
January 23, 2012 by Ademola Alawiye with agency report

The naira firmed against the United States dollar at the inter-bank market on Friday to its highest level in 18 days after the Nigerian National Petroleum Corporation sold about $550m to some lenders, providing support for the local currency.

The naira closed at N160.95 to the dollar, firmer than N161.55 at Thursday’s close, having traded around N160.20 intraday. The naira last traded at N160.20 on January 3, 2012, after the New Year festival.

Traders said the sudden increase in dollar liquidity in the market, owing to the currency sales by the NNPC provided support for the naira as those who won the bids were willing to sell to others at the inter-bank market.

Reuters

quoted a dealer as saying, “Next week (This week) we are most likely to see the naira trading within the range of N160.20 and N161.50 to the dollar at the inter-bank market as we expect more energy companies to sell dollars in the market.”

A banker with Access Bank Plc was also quoted as saying, “The NNPC’s $550m is a lot of money, so it will take a while before we see any serious depreciation in the naira rate.”Nigeria’s inter-bank lending rates rose on Friday to an average of 14.25 per cent from 14 per cent on Tuesday as foreign exchange purchases and other dealings drained liquidity from the system.

The Secured Open Buy Back rate closed at 14 per cent on Friday, up from 13.75 per cent on Tuesday. The OBB was 200 basis points above the Central Bank of Nigeria’s 12 per cent benchmark rate and four percentage points above the standing deposit facility rate.

Overnight placement rose to 14.25 per cent, from 14 per cent the previous week, while call money jumped to 14.50 per cent, against 14.25 per cent.

The market opened with a cash balance of about N94.8bn ($587.03m) on Friday.

Traders expected liquidity positions to improve last week as budget allocations to government agencies were credited to their bank accounts.

Some dealers said a rate drop might likely occur earlier in this week but could climb later due to a planned auction of about N89.7bn in 10-year bond on Wednesday by the Debt Management Office.

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