The Central Bank of Nigeria (CBN) intervened to support the naira currency on Thursday (19th December 2013), lifting it against the dollar despite the U.S. central bank’s move to reduce the stimulus that has flooded emerging markets with cash.
The naira, which lost 0.53 percent on Thursday morning, firmed against the U.S. dollar to close at N158.55 on central bank’s intervention. The local unit had ended at a two-month closing low of N159.95 on Wednesday.
Dealers say the central bank sold an undisclosed amount of dollars to some lenders on Thursday to support the naira after it weakened to N160.85, its weakest since mid-October.
Yields on Nigerian government bonds were mixed as investors digested the Fed news.
The 10-year benchmark bond, which is listed in the JP Morgan emerging market government bond index (GBI-EM), closed flat at 13.03 percent, after yields had initially risen 20 basis point in mid-trade to 13.23 percent.
The 5-year bond saw its yield rise marginally to 13.1 percent on Thursday, from Wednesday’s close of 12.82 percent.
“There was a bit of sell-off in the morning (but) markets stabilised with bids coming back,” one dealer said.
The U.S. Federal Reserve said late on Wednesday that it would trim the pace of its monthly asset buying by $10 billion to $75 billion, saying the U.S. economy was finally strong enough for it to start tapering.
Stocks shrugged off the tapering news to gain 1 percent, lifted by the banking and consumer goods sectors. Africa’s second biggest index has gained 40 percent since this year.
“Markets should be relieved now that an element of uncertainty around tapering has been removed. I think the Nigerian market will shift its focus to domestic issues including the direction of monetary policy next year … and general macro-stability in the run up to elections,” said Alan Cameron, economist at CSL Stockbrokers.
Domestic fund managers have been selling riskier assets and moving money into short-term debt due to uncertainty over government spending ahead of elections in 2015 and the future leadership at the central bank 
Source: Reuters