The local currency closed at 157.90 to the dollar, the same level it was at last Wednesday and firmer than the 158.35 it closed at on Friday.

"Some foreign banks sold dollars in the market today, possibly from the inflows they got from their offshore clients and this helped strengthened the naira value," one dealer said.

The naira has been trading within the band of 157-158 to the dollar since the central bank introduced a tighter measures to control naira liquidity in the system and a rising offshore interest in local debt on the expected inclusion of Nigeria's debt in JP Morgan's emerging markets government bond index from October.

The central bank in July raised the cash reserve requirement for lenders to 12 percent from 8 percent, and reduced net open foreign exchange positions to 1 percent from 3 percent, to restrict the money supply and support the currency.

The bank also barred banks that borrow naira funds from its official window from using those funds to buy dollars at its bi-weekly auction, in a bid to crack down on currency speculation.

JP Morgan said two weeks ago that it plans to include Nigeria in its Government Bond Index - Emerging Markets (GBI-EM) from October, potentially bringing up to $1 billion into one of Africa's most developed debt markets.

At the bi-weekly foreign exchange auction, the central bank sold $250 million at 155.80 naira to the dollar, compared with $120 million sold at the same rate last Wednesday.

Dealers said the naira will continue to hover around the present band because of expected dollar sales by some oil companies to meet their month-end local currency obligations.