The naira traded flat against the United States dollar at the inter-bank market on Monday as oil firms’ greenback sales boosted liquidity in the market.

The naira recovered to N162.87 against the dollar on Monday, after it touched N163.20 in early trade. The naira had closed at N162.82 to the dollar on Friday.

Dealers said liquidity from last week’s dollar sales by oil firms, including the Nigerian National Petroleum Corporation, of around $500m was currently in the market and helping to support the naira.

At the auction, the Central Bank of Nigeria sold $350m at N155.91 to the dollar, compared with $350m it auctioned last Wednesday at N155.90.

Reuters quoted a dealer as saying, “The market is pretty liquid this week, but rates may gradually trend back upwards if the liquidity dries up.”

Inter-bank lending rates inched higher last week to an average of 15.83 per cent, from 15.66 per cent the previous week, after a large cash withdrawal by the NNPC and a tax remittance by telecoms company MTN drained liquidity from the system.

NNPC, a major dollar supplier to the inter-bank market, sold about $400m to some lenders last week and recalled its naira proceeds to its account with the Central Bank of Nigeria, while telecoms giant, MTN, remitted part of its corporate tax to the government, draining liquidity from the system.

Dealers said the market was very short this last week because of the large cash outflows from the system, which could result in the rates spike.

Traders said liquidity was initially boosted by Treasury Bill repayments last Wednesday, but the market opened short last Friday with a cash deficit of about N76bn ($468m) due to the large outflows.

Source: Punch