• Naira gains on planned oil firm dollar sales
Nigeria’s foreign exchange reserves rose by 2.96 percent on the month to $36.52 billion on April 27, the highest level in more than one year, data from the Central Bank released on Monday has showed.
Forex reserves in Africa’s top oil producer stood at $35.42 billion a month earlier and were at $33.09 billion a year ago.
Currency traders said rising dollar flows from offshore investors buying local debt and large dollar sales by local units of multinational oil companies had washed onto the market in the past few weeks.
That has taken pressure off the official supply window for the dollar by the central bank, allowing reserves to recover in Africa’s second biggest economy.
Nigeria relies on crude exports for more than 95 per cent of its foreign exchange earnings. Investors watch reserve data closely to gauge the strength of its defences against a potential dip in oil prices.
Analysts say $36 billion is roughly enough to cover import bills for six months.
The naira firmed against the US dollar on the interbank market on Monday, supported by speculation of planned dollar sales by two units of multinational oil companies and some banks selling down their position in anticipation of large month-end dollar flows.
Traders said the local currency strengthened to N157.40 to the dollar, 0.25 per cent firmer than the 157.80 to the dollar at Friday’s close.
The naira firmed to N157.20 to the dollar last week on the back of large dollar flows from oil companies and offshore investors buying local debt, but later in the week eased on the back of strong corporate demand for the hard currency.
“Demand for the dollar was very strong last week from some importers, driving the naira to its weakest in weeks. But people are anticipating large dollar flows this week from oil companies month-end sales, that was why the naira appreciated today,” one dealer said.
Traders said the market reacted to speculation that units of Royal Dutch Shell and ExxonMobil plan to sell dollar this week, coupled with some dollar inflows from offshore investors in local debt.
“We see more oil major companies coming into the market this week and the naira should settle within the present band in the coming days,” another dealer said.
Most oil multinational oil companies operating in Africa’s top energy producer sell dollars to banks on a month-end cycle to obtain naira for their local obligations.
On the bi-weekly foreign exchange auction, the Central Bank sold $120 million at 155.70 to the dollar on yesterday compared with $110.50 million at 155.65 to the dollar last Wednesday.
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