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NAIRA FALLS AS DOLLAR SALES DROP

By NBF News
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The naira weakened for a second day after the Central Bank of Nigeria (CBN) sold the least dollars in a month at an auction and as oil company sales were said to decrease.

The value of the naira dropped by 0.3 per cent to 157.45 to a dollar yesterday, havingĀ  advanced by 3.1 per cent this year. The CBN had sold $66 million at its bi-weekly auction on Monday, the least since the November 12 sale.

According to an emerging markets strategist at Standard Bank Group Limited, 'The naira is reverting to its recent equilibrium after the large foreign exchange sales from the NNPC pushed the exchange rate lower in previous days. The lower foreign exchange sales at the auction yesterday reflected the ample dollar supply in the market.'

The naira's appreciation this year could be traced to tight monetary conditions, improved supply of foreign exchange to the market by oil companies and increased inflows from portfolio investors, according to the CBN governor, Lamido Sanusi, after the regulator held its benchmark rate at a record high 12 per cent.

Nigeria's foreign currency reserves have increased by 36 per cent this year to $44.64 billion as at December 7, 2012, according to latest figures on the website of the CBN.

Africa strategists at Absa Capital, Johannesburg, Ridle Markus and Dumisani Ngwenya, in an e-mailed note to Bloomberg said, 'In the past week, month-end dollar sales by oil firms have supplemented CBN supply. With a stronger external buffer, firm oil prices and production as well as still tight monetary policy, we continue to expect the naira to trade in a narrow range into 2013.'

Yields on a 10-year naira debt fell three basis points to 12 per cent, according to data compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation's $500 million of Eurobonds due January 2021 declined two basis points to 4.17 per cent.