Naira appreciates on dollar sale

The naira rallied to its strongest level in more than six weeks against the dollar after supplies were boosted by sales of the U.S currency by oil companies.

The currency appreciated a second day, gaining 0.6 per cent to N159.65 per dollar, the highest on a closing basis since June 24. The move was the biggest gain yesterday among 24 African currencies tracked by Bloomberg.

'A combination of foreign-exchange sales from oil companies and corporate dollar supply supported the currency,' Samir Gadio, a London-based emerging-markets strategist at Standard Bank Group Limited., said in an e-mail.

'Additionally, the market expects state-owned oil company foreign-exchange flows to hit the system in the short term.'

Oil firms which sell the U.S. currency mainly at the month's end to meet domestic expenses, are the second-biggest supplier of dollars after the Central Bank of Nigeria. The apex bank auctions foreign exchange on Mondays and Wednesdays. It sold $598 million this week, little changed from the $600 million it sold in the previous five days.

The CBN's Monetary Policy Committee left its benchmark interest rate at a record 12 per cent for an 11th consecutive meeting on July 23, to protect the naira. It introduced a 50 per cent cash reserve requirement on public-sector funds after warning about the risk of excess liquidity.

Also, yields on Nigeria's $500 million Eurobonds due January 2021 fell two-basis points, or 0.02 percentage point, to 5.5 per cent. Borrowing costs on local-currency debt due January 2022, rose seven basis points to 13.75 percent yesterday, according to data compiled by Bloomberg.