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The Nigerian naira strengthened to a 5-week high against the US dollar on the interbank market on Wednesday, supported by increased dollar supply from oil companies.

The naira closed at 159.50 to the dollar, its strongest against the greenback since January 4, and compared with 160.30 at Tuesday's closed.

Traders said the local unit of Exxon Mobil, Niger Delta Development Commission (NNDC) and state-owned NNPC sold around $500 million towards the end of last week to some banks, while France's Total and Italy's AGIP sold a combined $88.8 million on Wednesday.

“The market is swimming in dollars as a result of inflows from energy companies and most banks are not taking positions and this has helped the naira to appreciate,” one trader said, adding that “The naira has strengthened at the interbank, close to the central bank's prevailing rate.”

On the bi-weekly forex auction, the central bank sold $450 million at 156.50 to the dollar, compared with $250 million sold at 156.85 to a dollar at the previous auction.

Dealers said the local currency should remain stable for the rest of the week because of the high level of dollar liquidity in the market, but could ease a little from next week as demand increases.

“The exchange rate at the interbank is almost at par with the official window and this has made the dollar attractive to buy for some importers. We expect to see increase in demand for dollar, while the naira should depreciate marginally,” another dealer said.

Traders said the naira could trade within a band of 159.20-160.50 in the near term. - Reuters