The naira declined against the United States dollar on the inter-bank market, reaching a two-month low and capping the worst week in 12, as foreign inflows and oil company foreign-exchange sales were said to be limited.

The local currency retreated 0.3 per cent to N158.525 a dollar, the lowest closing level since September 5.

According to data compiled by Bloomberg, the naira retreated by 0.7 per cent this week.

A strategist at Standard Bank Group, Mr. Samir Gadio, said, “It’s a temporary shortfall in supply last week. I don’t think there were significant foreign-exchange sales from oil companies and foreign inflows have been less robust.”

Oil-producing companies, which sell dollars to meet domestic expenses, are the second-biggest source of foreign currency after the Central Bank of Nigeria, which sells dollars on Mondays and Wednesdays to keep the naira within a three per cent band around N155 per dollar.

JPMorgan Chase & Co. added the West African nation’s bonds to its benchmark emerging-market index series last month. Barclays Plc followed last week when it said it would also add Nigerian debt to its emerging-market local-currency government bond index from March 2013.

According to Financial Markets Dealers Association website, prices compiled on the yields on 10-year naira debt have tumbled 348 basis points since August to 12.65 per cent.

Gadio said, “We suspect the foreign-exchange market will be more supported this week given the forthcoming fixed-income auctions. Foreign-exchange demand is not meaningful and market confidence remains strong.”

The CBN sells bills to help manage currency supply within the market. The regulator is offering N116.2bn ($733m) of bills on November 22. The Debt Management Office is also scheduled to sell N50bn of 10-year and seven-year bonds next week.

The CBN, led by  Lamido Sanusi, has left its benchmark interest rate unchanged at a record high 12 per cent this year to help support the naira and keep prices low.

Sanusi told an investor conference in Lagos on Thursday that Nigeria’s food inflation accelerated last month after flooding this year washed away farms.

Annual inflation slowed to 11.3 per cent in September from 11.7 per cent the previous month. Food prices, which account for more than half of the consumer price index, rose 10.2 per cent from a year earlier, compared with 9.9 per cent in August.

Source: Punch