Nov 18, 2014/Bloomberg

The naira swung between gains and losses after the Nigerian central bank lifted limits on the sale of dollars bought from the regulator in the interbank market, according to Standard Chartered Plc.

The removal of a rule banning greenback sales at a spread of more than 10 kobo at the interbank market “led the currency to rally” following a slide to a record low, Samir Gadio, the London-based head of African strategy at Standard Chartered, said by phone today. The strengthening may prove short-lived as a “demand-supply mismatch” of dollars remains, he said. Phone calls to Ibrahim Mu’azu, a spokesman for the Abuja-based central bank, weren’t answered.

The currency of Africa’s largest crude producer fell less than 0.1 percent to 173.20 against the dollar as of 5:34 p.m. in Lagos, the commercial capital, paring losses after it weakened to 176. The nation’s foreign reserves dropped to $37.6 billion on Nov. 14, their lowest level since July 1, after central bank interventions to bolster the naira.

The spread restriction “sort of created two interbank markets,” said Gadio. “One based on the central bank intervention funds and another that was quoted higher.”

Nigeria’s government is planning to cut spending by 6 percent next year and lower its benchmark oil price to $73 a barrel, down from from $77.50 in this year’s budget as it seeks to stabilize the market hit by a fall in oil prices, Finance Minister Ngozi Okonjo-Iweala said Nov. 16. Okonjo-Iweala’s announcement followed central bank Governor Godwin Emefiele’s pledge last week to continue defending the naira with interventions.

“Strong dollar demand for imports, the repatriation of profits by companies as well as uncertainty about the ability of central bank to manage the exchange rate is undermining the naira,” Kunle Ezun, a Lagos-based currency strategist at Ecobank Transnational Inc., said by phone.