Nigeria Naira Heads for Biggest Gain in 3 Weeks on Dollar Sales to Bureaux

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Nigeria’s naira headed for the biggest gain in three weeks after the central bank doubled the amount of dollars banks can sell to foreign-exchange bureaux.

The currency of sub-Saharan Africa’s second-biggest economy appreciated 0.3 percent to 152.55 per dollar, heading for its largest increase since July 12 by 4:40 p.m. in Lagos, according to data compiled by Bloomberg.

The central bank doubled the amount of money banks can sell to foreign-exchange bureaux to $500,000 a week in a bid to stabilize the trading rate of the local currency, it said on July 28.

“The increase in dollar sales to bureaux has reduced pressure at the interbank market, thereby resulting in an appreciating naira,” Usman Onoja, chief executive officer of Lagos-based Lovonus Trust and Investment Ltd., said by phone today. “The measure is capable of checking speculation.”

The Central Bank of Nigeria targets naira stabilization by keeping the rate within 3 percent above or below 150 per dollar at its twice-weekly currency auctions in a bid to control inflation. Nigeria raised its benchmark interest rate for the fourth time this year to 8.75 percent on July 26. While inflation slowed in June to 10.2 percent, the weakest since May 2008, the core inflation rate, which excludes food, is expected to accelerate in the second half, Governor Lamido Sanusi said.

The naira’s marginal rate, which is also used as the prevailing exchange rate, depreciated to 150.62 per dollar at today’s currency auction, the weakest in a month, compared with 150.46 at the previous sale on July 27. The central bank sold $400 million at the auction, less that $443.95 million demanded by lenders.

Sanusi said July 26 that the monetary policy committee  “noted” the difference between the auction and bureaux de change rates and that the spread may lead to “arbitrage” and “unhealthy speculation.”

To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net

To contact the editor responsible for this story:  ntony Sguazzin at asguazzin@bloomberg.net

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