The naira rose to its highest level in three weeks against the United States dollar on the interbank market yesterday, after the Central Bank of Nigeria intervened in the market and speculation mounted of a planned dollar sale by the state oil firm.
The local currency closed at N161.45 to the dollar on the interbank market, the level last seen on June 4, and firmer than the N163.25 a dollar it closed at on Friday.
Dealers said the volatility continued intraday when the naira fell to as low as N163.90 before the central bank sold large dollars to some lenders, which provided support for the naira and calmed the market.
"The central bank's intervention did the magic to save the naira today otherwise, it would have crossed the N164 to the dollar mark," one dealer said.
"We also had the speculations that the Nigerian National Petroleum Corporation (NNPC) will be selling dollar on Tuesday, which helped provide support", another dealer said.
Traders said additional $13.7 million was sold by two oil companies, Addax and a unit of ExxonMobil, which also helped to lift the market.
The Nigerian currency has consistently weakened against the dollar in the last two months on the back of strong dollar demand, declining supply from multinational oil companies and mass exit of the local debt market by offshore investors fleeing to safe havens because of the Eurozone debt crisis.
"If the NNPC finally sells dollar in the market this week, we may see the naira strengthening to around 160 to the dollar level," another dealer said.