Naira gains 0.8% on CBN dollar sale

The naira closed on the interbank market on Monday after the Central Bank of Nigeria sold dollars to some commercial banks towards the end of a trading session that featured no trades in the first four hours, traders said.

The naira closed at 305.50 to the dollar, 0.81 per cent firmer than its Friday close.

Traders said the CBN selectively sold dollars to commercial banks just before the market close, Reuters reported.

“The central bank came to the market toward the close, and sold dollars to only few banks, which helped to support the naira,” a trader said.

The CBN has been selling dollars to boost liquidity and support the naira.

The overnight naira interbank lending rate hit 21.75 per cent on Monday. The overnight naira interbank lending rate had soared to 25 per cent on Friday, having hit 22 per cent the previous day.

It stayed ultra-high on Friday, quadrupling from 6.26 per cent since Wednesday as the CBN took steps in the debt and currency markets to prop up the ailing local currency.

The naira had hit an all-time low of 353.75 to the dollar on Thursday.

The CBN sold dollars on Thursday and Friday. It also sold about N236bn ($776m) of open market operations treasury bills on Thursday, which sent the banking system into a deficit of around N39bn on Friday.

The combined operations pushed the naira up by 5.2 per cent to 308 to a dollar.

Traders said the CBN also debited commercial banks accounts for the purchases of bonds and primary market treasury bills auctioned on Wednesday, which added to the shortage of naira in the market.

Traders said interbank rates should ease this week when part of July’s budget allocation should enter the banking system.

The Federal Government distributes revenue from crude exports every month among its 36 states, and local and federal administrations.