The naira climbed for a second day, heading for the strongest in almost two weeks, after the central bank extended its increased supply of dollars and on speculation energy companies may sell foreign exchange.
The currency of Africa's biggest oil producer appreciated 0.6 per cent to 161.2 per dollar as of 11:10 a.m. in Lagos, the commercial capital, according to data complied by Bloomberg. A close at that level would be the highest since June 6. The naira has gained 0.7 per cent against the dollar this year, the third- best among African currencies tracked by Bloomberg.
The Central Bank of Nigeria sold $400 million at a foreign- currency auction yesterday, matching the amount sold on June 13, which was the most since Feb. 8. The Abuja-based regulator is the main supplier of foreign currency to the market through twice-weekly auctions and direct sales to lenders in the interbank market. The oil industry is the second major source of dollar supplies in the country.
"Notwithstanding, seemingly strong importer demand, the increased intervention by the CBN and expected end-of-month dollar sales by oil firms going into next week bodes well for the naira's near-term outlook," Ridle Markus, Dumisani Ngwenya and Mike Keenan, Johannseburg-based strategists at Absa Capital, wrote in a report yesterday.
Nigeria's foreign-currency reserves, which have risen 14 percent this year, fell for a seventh straight day to $37.4 billion, according to June 15 data compiled by the central bank. The West African nation's benchmark Bonny Light crude has dropped 25 percent from its March peak this year.
The naira was under pressure recently due to "a pick-up in dollar demand, particularly from fuel importers, leading to the central bank having to make periodic interventions on the inter- bank market," Gregory Kronsten and Olubunmi Asaolu, London- based analysts at FBN Capital Ltd., wrote in a note to clients today. They see the naira reaching 163 per dollar year-end and 170 by the end of 2013