The naira rallied to its strongest level in almost six weeks as the Nigerian National Petroleum Corporation was sold dollars to the local market.
Oil producers, the NNPC are the biggest source of the United States currency after the Central Bank of Nigeria, which offers foreign exchange at auctions on Mondays and Wednesdays to maintain local-currency stability.
The naira is the best performer among 24 African currencies tracked by Bloomberg in April, climbing 2.4 per cent.
The Nigerian unit gained one per cent to N161.19 per dollar by 3:28pm in Lagos, the highest since February 28 on an intraday basis. The currency has climbed for two days, paring this year’s decline to 0.6 per cent.
“The rally in the foreign-exchange market is the product of NNPC dollar sales coupled with an aggressive offshore bid for naira fixed-income assets,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank Group Ltd., said in e-mailed comments today.
“It looks like the bullish external risk environment is pushing foreign investors to come back to the Nigerian market.”
The naira had firmed by 0.61 per cent against the dollar on Wednesday, supported by large sales of the United States currency by the NNPC and flows from offshore investors for debt purchases.
According to a Reuters report, the local currency closed at N162.90 to the dollar, the level last seen on February 18 when it closed at N162.50 to the dollar.
The CBN had offered $400m for sale on Wednesday at its twice-weekly regulation auctions to dealers.
Out of this amount, only $278m was sold to the authorised forex dealers, according to central bank statistics.
Last Monday, the naira held steady against the dollar on the interbank market on Monday, supported by sales of the US currency by two major energy companies.
The local currency had sustained a stable outlook since two weeks ago when the CBN hiked the Cash Reserves Requirement on private sector deposits at the end of its monetary policy committee meeting.
Meanwhile, the foreign exchange reserves had dropped 5.76 per cent month-on-month to $37.8bn last week.
This week, it went up to $37.9bn. The reserves had stood at $40.11bn on February 28. They have fallen 22.17 per cent since this time last year, when they were $48.57bn.