Foreign exchange reserves rose to a 21-month high of $37.64bn by May 28 and were up by three per cent from a month earlier, the latest figures from the Central Bank of Nigeria showed on Thursday.

The forex reserves stood at $36.52bn at the end of April and $32.08bn a year ago.

The reserves have not been this high since August 19, 2010, when they stood at $37.67bn.

The CBN attributed the increase to the rise in capital flows from offshore investors and favourable oil prices in the international market.

Forex reserves had earlier risen to their highest in 21 months to $37.02bn by May 14, from $36.66bn at the end of last month.

The naira fell against the United States dollar on the inter-bank market on Wednesday, as expected month-end dollar flows from oil companies failed to materialise, creating a dollar shortage in the market.

The naira closed at N159.95 to the dollar, weaker than the N158.95 it closed at on Monday.

Traders said there was sustained strong demand for the dollar from importers. With only $2m sold by a unit of Addax Petroleum, the local currency came under pressure.

Currency dealers said the Central Bank of Nigeria had sold about $100m to some lenders on Monday, outside its bi-weekly forex auction, in a move to support the naira and help calm the market.

Traders said the direct intervention by the CBN was meant to sustain the naira within +/- three per cent around N155 to the dollar band.

The CBN sold $250m at N155.75 to the dollar on the bi-weekly forex auction on Wednesday, the same volume and price it sold at Monday’s auction.

Inter-bank lending rates tumbled last week to an average of 10.41 per cent, compared with 14.66 per cent recorded the previous week, after large cash flows from budgetary allocations to government agencies boosted liquidity in the market.

A total of N563.09bn was distributed last week among the government’s three tiers in April, compared with N613.70bn in March.

The proceeds hit the market on Thursday, raising the liquidity level and forcing down the cost of bank borrowing.

Source: Punch/Ademola Alawiye