The naira hit resistance at 363 last week, traders said, saying that businesses with urgent dollar demand were bidding the currency weaker to fill their orders. Traders said the central bank was targeting dollar sales to foreign investors.
Pressure has been building up on the currency as oil prices drop and as foreign investors book profits from local bonds after yields fell on the debt market. A one-year open-market bill auction fetched around 12% last month, down from as high as 18% a year ago.
“There hasn’t been supply in a while, foreign investors are exiting,” one trader said.
Nigeria operates a multiple exchange rate regime. It maintains an official exchange rate of 306.90 naira to the dollar, supported by the central bank. The traded rate of 363.50 is the one widely quoted by foreign investors and exporters.
Another trader said the central bank was directing dollar sale to foreign investors to help curb pressure on the currency and keep the naira quoted in an orderly manner.
The bank has been intervening on the forex market over the past two weeks to prop up the naira as foreign investors exit.