The Central Bank of Nigeria is currently intervening with dollar sales in the foreign exchange market to support the ailing naira currency, its Deputy Governor told Reuters on Friday.
Sarah Alade said the naira, which has lost around six per cent so far, had been trading outside its preferred band for some time now, but that the bank will continue to defend the currency.
The unit firmed to 169.70 naira at 1023 GMT on central bank intervention after hitting 173.05 naira in mid-morning trade against the dollar.
“We would continue to defend the currency, we have always said that,” Alade told Reuters by telephone, adding that the bank was comfortable with level of the country’s foreign reserves of around $38 billion.
Asked how far the bank was willing to go to defend the naira, she said: “The markets would dictate that.”
She said that the last time Nigeria devalued its currency, oil prices were lower than now, even though the price is declining.
“At the last time when did that (devalued), we didn’t have the kind of oil prices that we have now, so we are still comfortable,” Alade said.
The currency has come under pressure in the past two months from falling global oil prices, dampening the appetite for assets in Africa’s biggest economy and chief oil exporter.
The naira has touched new intraday lows nearly every trading session on strong dollar demand partly from foreign investors unnerved by falling oil prices, exiting Nigeria and from domestic importers, worried about the risk of a currency devaluation.
The central bank on Thursday restricted the sale of dollars to importers of telecoms equipment, power generators and finished products at its foreign exchange auction, funnelling demand towards the interbank market.
The bank also limited lenders and discount houses from placing more than N7.5 billion ($44m) each as deposits with the regulator, further swelling interbank naira liquidity.
Meanwhile, Nigeria plans to raise 65 billion naira ($392 million) worth in sovereign bonds with maturities of three to 20 years at an auction on November 12, the Debt Management Office said on Friday.
The debt office said it will auction 10 billion worth of three-year bonds, 30 billion naira of 10-year debt notes and 25 billion naira of 20-year bonds next Wednesdayusing the Dutch Auction system.
All the bonds are re-openings of previously issued debt notes.
“For re-openings of previously issued bonds, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” DMO said in a notice.