The Central Bank Nigeria (CBN) has reported an increase in official reserves for March at US$1.2 billion, to a new total of $48.6 billion.
The reserves has risen in each of the past eight months (other than December), and by US$12.1 billion since the end of July 2012 when the MPC hiked the cash reserve requirement for banks by 400bps.
FBN Capital Research in its report revealed that the increase in March was striking since the presidency authorised the withdrawal of US$1billion from the excess crude account (ECA) and the CBN intervened directly in the market to underpin the exchange rate.
The report noted that the direct intervention was influenced by the slowdown in offshore flows to the interbank market to buy naira-denominated debt. Demand therefore picked up at the bi-weekly auctions, where CBN sales rose from a total of US$1.15 billion in February to US$1.67 billion.
The report said: “Provided that the oil price obliges, in our view the CBN will be able to hold the line on the naira exchange rate this year. “Reserves at end-March provided cover for more than nine months’ imports of goods, and close to seven months when we include services,” it said.
Meanwhile, 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 February 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 yesterday, CBN sold $237.2 million at N155.74 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 N155.75 to the dollar.
The Abuja-based bank offers foreign currency at auctions on Mondays and Wednesdays to maintain exchange-rate stability. It didn’t hold a sale on April 1 because of a public holiday. Oil companies, which sell dollars to meet domestic expenses, are the second-biggest source of the currency after the central bank.