Naira Heads for 21-Month Low on Dollar-Supply Drop

The naira headed for its lowest in 21 months as the central bank sold fewer dollars to banks than expected and as oil-industry foreign-currency supplies didn’t meet the demand, according to Standard Bank Group Ltd.
The currency of Africa’s biggest crude producer weakened 0.2 percent to 163.72 per dollar as of 2:05 p.m. in Lagos, the commercial capital, set for the weakest on a closing basis since December 2011. The naira declined 4.6 percent this year.
The Central Bank of Nigeria sells dollars at twice-weekly auctions and at occasional offers directly to lenders to support the naira. It’s the country’s major supplier of foreign exchange. Oil producers, which sell the U.S. currency mainly at the end of the month to pay domestic expenses, are the second-biggest.
“Domestic and foreign investors expected the CBN to step in more aggressively in the interbank market, but their intervention on Friday was too modest to make a difference,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank, said in an e-mailed reply to questions today. “Oil dollar sales are just not sufficient to cover demand.”
Ugochukwu Okoroafor, a spokesman for the Abuja-based central bank couldn’t be reached for comments as two calls made to his office didn’t connect.
The central bank will sell the U.S. currency at an auction today after $525 million in offers last week. The amount sold directly to banks on Sept. 6 wasn’t announced by the bank.
“The CBN is likely to intervene further this week” with direct sales to lenders, Gadio said.
Borrowing costs on Nigeria’s Eurobonds due Jan. 2021 declined one basis point, or 0.01 percentage point, to 5.88 percent.
Source:  Bloomberg

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