Nigeria's naira currency strengthened to its highest in six weeks against the U.S dollar on the interbank market on Wednesday, buoyed by increased dollar supply from two oil companies and a drop in demand for dollars at the official foreign exchange window.
The naira closed at 158.05 to the dollar on the interbank market, firmer than the 158.60 it closed at on the previous day. It was its strongest since Feb. 25, when it closed at 157.45 to the dollar.
Traders said a unit of Royal Dutch Shell sold an unspecified amount of dollars to some lenders, while ExxonMobil's local sold about $56.4 million, boosting dollar liquidity in the market amid low demand.
On the twice-weekly auction on Wedenesday, the central bank sold $237.2 million at 155.74 naira to the dollar, short of the $300 million it initially offered at the auction. The bank sold $300 million at the previous auction last week at 155.75 to the dollar.
Traders said central bank also sold additional dollars directly to some lenders on Tuesday, its third intervention in the foreign exchange market this year, helping the local currency to regain some of its lost value.
"We see this trend continuing as long as there are continued dollar flows from oil companies, otherwise, the naira should depreciate marginally to around 158.30 to the dollar in the short term," one dealer said.
Traders said more energy companies are expected to sell dollars in the market in the days ahead, which could help boost support for the naira.