The central bank sold just 50.65 billion naira ($321 mln) in 3- and 6-month bills compared to plans announced last week for an auction of up to 70.65 billion naira.

Dealers said the bank had rejected bids that were higher than it was prepared to pay for short-dated papers, pushing yields down to 14 percent from 14.5 percent at a previous sale two weeks ago.

That pointed to pent-up demand for the currency from foreign players, and the naira firmed to 157.80 at 1102 GMT against the US dollar on the interbank market, recovering from a low of 158.10 naira where it closed the previous day.

The bank auctioned 20 billion naira of 182-day paper at a yield of 15.08 percent, compared with 15.30 percent it sold on Aug.9. Nigeria issues treasury bills twice-monthly to reduce the money supply, curb inflation and help lenders manage their liquidity.

Total subscriptions for the bills were 136.91 billion naira.