The naira strengthened against the United States dollar on the inter-bank market and held steady on the official window on Wednesday, as large dollar inflows from offshore investors boosted greenback liquidity and supported the local currency.

The naira closed at N157.60 to the dollar on the inter-bank market, firmer than the N157.70 to the dollar it closed at on Tuesday, owing to increased dollar inflow.

Reuters quoted a dealer as saying, “There is a treasury bills auction today and we have seen large dollar inflows from offshore investors participating at the auction. This has accounted for the increase in dollar liquidity in the market and the appreciation in naira value.”

Currency traders said three energy firms sold about $8m to some lenders, while a subsidiary of a foreign bank sold additional dollars in the market, which further boosted liquidity and provided support for the naira.

More offshore investors are investing in Africa’s second biggest economy’s local debt because of attractive yields, helping to support dollar supply to meet domestic demand.

Another dealer was quoted as saying, “We see the naira trading within the current range of N157.60 and N157.90 for the rest of the week because of the effect of the large dollar inflows from foreign investors and a possible dollar sale by Total in the week,” another dealer said.

Meanwhile, at the bi-weekly auction, the Central Bank of Nigeria sold $200m at N256.06 to the dollar, the same volume and rate at the previous auction on Monday.

Inter-bank lending rates rose sharply last week to an average of 15.08 per cent, from 14.25 per cent recorded the previous week, as the Nigerian National Petroleum Corporation and Nigeria Deposit Insurance Corporation made large withdrawals, putting commercial banks in deficit with the Central Bank of Nigeria.

Traders said the market opened with a negative balance of N129.55bn ($820.72m) on Friday, compared with a positive balance of about N65bn last Friday.

The secured Open Buy Back rose to 14.50 per cent, from 13.75 per cent the previous week, representing 250 basis points above the CBN’s 12 per cent benchmark rate, and 450 percentage points above the Standing Deposit Facility rate.

Overnight placement jumped to 15.25 per cent, compared with 14.24 per cent, while call money traded at 15.50 per cent, against 14.75 per cent the previous week.

Source: Punch