Naira stays at N157.80 on strong dollar demand

The naira traded flat against the United States dollar at both the inter-bank and foreign exchange markets on Monday, as strong demand for the greenback soaked up liquidity from two oil firms and the Central Bank of Nigeria’s currency auction.

According to Reuters, the naira closed at N157.80 to the dollar, around the same level it ended at on Friday.

At the bi-weekly auction, the CBN increased dollar supply to $200m, from the $180m it sold at last Wednesday’s auction, but maintained the rates at N155.78.

Dealers said the local unit of French oil firm Total sold $44m to some banks while Agip sold around $7m, but strong demand lapped it up.

The naira has traded around the N157 and N158 level to the dollar over the past one month, owing partly to dollar sales from oil companies and inflows from offshore investors buying bonds.

Dealers expect the currency to hover around current levels throughout this week, as month-end dollar inflows from oil firms boost liquidity in Africa’s second biggest economy.

Inter-bank lending rates eased more than 500 basis points on Friday to an average of 10.83 per cent, compared with 16.33 per cent recorded the previous week, after a cash dispersal from the August budgetary allocation to government agencies hit the system.

A total of N570bn ($3.62bn) was distributed from oil receipts to the three tiers of government last week, and traders said about half of the funds hit the system on Thursday, sinking the cost of borrowing among banks.

The government shares proceeds from oil sales from a centrally held account every month among the three tiers of government – federal, state and local – providing liquidity to the banking system and determining lending rates.

Dealers said the market opened with a cash balance of about N317bn ($2.01bn) on Friday, compared with a negative balance of N42bn last Friday.

The secured Open Buy Back fell to 10.5 per cent from 15.75 per cent the previous week, 1.5 percentage lower than the Central Bank of Nigeria’s 12 per cent benchmark rate and 50 basis points above the Standing Deposit Facility rate.

Overnight placement and call closed at 11 per cent apiece compared with 16.50 per cent and 16.75 per cent,