Nigerian naira will consistently remain strong against the U.S. dollar in the coming days as more offshore investors are taking position in the local debt market to benefit from recent rally after the inclusion of the country in the JP Morgan government index on October 1.
The naira has stabilised around the 157-158 naira to the dollar in the last two months with dollar sales by oil companies and foreign investors buying treasury bills and bonds contributiing to support the currency.
The currency was trading at the interbank market around 157.25 to the dollar on Wednesday, 155.75 naira to the dollar at the official window and 160 naira to the dollar on the parrallel market. The naira closed at 157.40 to the dollar on the interbank market the previous day.
Nigeria depend on importation of basic goods, including raw materials for its comapnies and refined gasoline despite being the eighth world largest exporter of crude oil and this lead to pressure on the naira.
Traders said rising foreign reserves of $41.6 billion as at Oct.8, its highest in two years could further provide support for the local currency and help it stabilise around the current level.
"We continue to see dollar inflows into the economy from foreign portflio investors buying local debt and investing in the equity market, which has seen major recovery in recent time and with positive impact on the local currency," a currency dealer said.
A stornger naira could means inflation would trend down but a further pressure on the country's foreign reserves as perchant for imported goods by the Nigerians elite would raise demand for the dollar.