The naira rose to its highest level in three weeks against the United States dollar on the inter-bank market on Monday, after the Central Bank of Nigeria intervened in the market.

Currency traders added that speculation that the Nigerian National Petroleum Corporation planned to sell dollars also helped the naira to strengthen.

The local currency closed at N161.45 to the dollar on the inter-bank market, the level last seen on June 4, and firmer than the N163.25 a dollar it closed at on Friday.

Dealers said the volatility continued intraday when the naira fell to as low as N163.90 before the CBN sold large dollars to some lenders, which provided support for the naira and calmed the market.

Reuters quoted a dealer as saying, “The CBN’s intervention did the magic to save the naira today otherwise, it would have crossed the N164 to the dollar mark. We also had the speculations that the NNPC will be selling dollar on Tuesday (today), which helped provide support.”

Traders said additional $13.7m was sold by two oil companies, Addax and a unit of ExxonMobil, which also helped to lift the market. The Nigerian currency has consistently weakened against the dollar in the last two months on the back of strong dollar demand, declining supply from multinational oil companies and mass exit of the local debt market by offshore investors fleeing to safe havens because of the Euro zone debt crisis.

“If the NNPC finally sells dollar in the market this week, we see the naira strengthening to around 160 to the dollar level,” another dealer said. Inter-bank lending rates climbed higher to an average of 15.66 per cent last week, from 14.5 per cent recorded the previous week, after the NNPC recalled a portion of its deposits with some banks and forex purchases drained liquidity.

Currency traders said the market opened with a cash deficit of about N78.7bn ($482.82m) on Friday, compared with a surplus of about N10bn last week.The secured Open Buy Back climbed to 15 per cent last week, from 14.25 per cent the previous week, representing 300 basis points above the CBN’s 12 per cent benchmark rate, and five percentage points above the Standing Deposit Facility rate.

Overnight placement and call money closed at 16 per cent each, compared with 14.5 per cent and 14.75 per cent recorded the previous week respectively.

Source: Punch