February 7, 2019 / 1:40 PM / 6 months ago

UPDATE 1-Nigeria naira firms as funds shrug off election risk to buy treasuries

(Adds details, quote, stocks)

By Chijioke Ohuocha

LAGOS, Feb 7 (Reuters) - The Nigerian naira has gained 0.55 percent in a week to reach 361 per U.S. dollar on Thursday as foreign funds shrugged off the risk of forthcoming elections to buy government treasuries, traders said.

The currency was quoted between 362.50 and 363 a week ago on the over-the-counter market, traders said.

Foreign investors have been buying one-year Nigerian treasuries, yielding 15 percent, helping boost dollar liquidity on the currency market, after the naira touched 365 last month.

On Thursday, the central bank auctioned 321 billion naira of bills, more than it had offered. The bank has been selling treasuries to lure foreign investors that fled at the start of the cycle of interest rate hikes in United States which hurt the naira.

“There’s liquidity on the market,” one trader said.

“We have traded as low as 360.80 naira this week. Foreign investors are coming in. I don’t think they are as concerned with the elections or the premium on yield is good enough.”

On the stock market, Nigeria’s top 10 banks soared 3.74 percent on Thursday.

Nigerians go to the polls on Feb. 16 for a presidential election. The incumbent Muhammadu Buhari and his deputy have been touring the country to woo voters for a second term in office.

Traders say investors have been buying bonds partly to offset lower yields abroad, especially after the U.S. central bank signalled a dovish stance on rates this year and on the assumption of limited policy changes in Nigeria if Buhari wins re-election.

“If the incumbent wins, status quo could remain and if the main opposition wins ... they sound more pro-market so investors have nothing to lose,” another trader said.

The main opposition candidate Atiku Abubakar has said he would consider an amnesty for corruption suspects and privatise the state-owned oil company NNPC and float the naira currency to attract investors back to the country.

Nigeria has at least three different exchange rates, which the central bank has used to manage pressure on the currency. At currency bureaus the naira was quoted at 361 and 306.20 on the official market, supported by the central bank. (Reporting by Chijioke Ohuocha; Editing by Toby Chopra)

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