The naira currency firmed against the United States dollar on the inter-bank foreign exchange market on Wednesday, supported by large dollar sales by units of two energy multinational companies and a slowdown in demand.

The naira closed at N162.55 to the dollar on the inter-bank market, slightly higher than the N162.70 to the dollar it closed at the previous day.

Reuters quoted a dealer as saying, “The dollars sold by Shell (unit of Royal Dutch Shell) and (France) Total on Tuesday hit the market today, helping to provide the needed support for the naira.”

Traders said while Shell sold an undisclosed amount of dollars, Total sold about $92m, which raised the level of dollar liquidity in the market and boosted the naira value.

At the bi-weekly auction, the Central Bank of Nigeria sold $350m at N155.94 to the dollar, compared with $350m sold at N155.91 to the dollar on Monday.

Traders said the market was long on dollars and the exchange rate could hover around the present level for the rest of the week.

Another dealer was quoted as saying, “Most offshore investors have taken the bulk of their funds out and this has slowed down demand pressure, while we are expecting more oil companies to sell dollars in the coming days as part of their month-end sales cycle.”

The naira has been on a downward trend in recent weeks, despite the CBN’s interventions to prop it up, driven initially by dollar demand from fuel importers and later by an exodus of foreign investors out of bonds repatriating their returns.

Nigeria’s external reserves have continued to plunge in the last three weeks, dropping by $837m to $36.931bn on June 25, from $37.768bn on June 6, 2012.

Latest figures released by the CBN showed that the reserves fell by $837m in 19 days.

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

However, the reserves have continued to witness decline following drop in oil price.

Some analysts have also said that the CBN have been leaning on forex reserves to support the local currency.

The CBN, in a bid to reduce the pressure in the foreign exchange market, recently increased its dollar sales to $400m at the bi-weekly auction of the apex bank, from $300m.

Source: Punch