Naira gains slightly as $876 million forex auction boosts dollar supply

The naira strengthened slightly in the official market after the Central Bank of Nigeria sold dollars during a rare currency auction to boost domestic liquidity.

The Nigerian currency traded at 1,596 naira per dollar Wednesday from 1,601 the day before, according to FMDQ data compiled by Bloomberg. The central bank earlier said it had sold $876 million, filling bids from 26 lenders at 1,495 naira/dollar.

It undertook the auction to “boost FX liquidity to the market as well as promote price discovery,” the central bank said, adding that it received bids total $1.18 billion from 32 lenders.

The auction was “a significant FX intervention that should help improve support for the naira in the near term,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc in London.

“The CBN will likely need to remain the main provider of USD liquidity until portfolio inflows eventually recover and other capital flows pick up,” he said.

The naira has come under recent pressure due to seasonal dollar demand from wealthy Nigerians taking summer vacations, as well as businesses seeking greenbacks to bring in goods in the import-dependent nation. It has declined about 70% against the dollar since currency reforms last year allowed it to float freely in a bid to attract foreign investment.