Oct 24, 2014Nigeria’s naira gained, capping its first weekly advance in nine weeks, after the central bank pledged to intervene to support the currency hit by lower oil prices.
The naira strengthened 0.3 percent, the most on a closing basis since Oct. 13, to 164.67 per dollar as of 5:17 p.m. in Lagos, the commercial capital. It reached a seven-month intraday low of 166.42 yesterday before Sarah Alade, a deputy governor at the central bank, said the institution would use foreign reserves to defend the value of the currency.
“The market has reacted to that,” Ayodele Akinwunmi, an analyst at First Securities Discount House Ltd. in Lagos, said by phone. “It was important for them to outline what their policy is likely to be.”
Since mid-September, the Central Bank of Nigeria has sold dollars to banks outside of its regular auctions on Mondays and Wednesdays, according to Standard Chartered Plc. (STAN) While reserves of Africa’s biggest oil producer shrunk to $39.1 billion on Oct. 22 from $43.6 billion at the end of 2013, they still equate to seven months of import cover, high enough for the central bank to continue backing the naira, said Akinwunmi.
Brent crude declined 0.4 percent to $86.52 per barrel. It fell to a four-year low of $82.93 on Oct. 16, having closed at $112.60 on June 24.
“We will continue to defend the naira,” Alade said. “Our foreign-exchange reserves are still robust.”
The regulator will keep using the auctions, where it offers the currency at 155 per dollar plus or minus 3 percent, and direct dollar sales to banks to preserve the value of the currency, she said.
Bloomberg
