Nigeria Naira Weakens on Concern Central Bank Won’t Defend Peg

Nigeria’s naira slipped against the dollar on speculation that the central bank won’t be able to defend its targeted trading range for the currency.

The currency of Africa’s top oil producer retreated 0.1 percent to 158.75 per dollar as of 10:52 p.m. in Lagos, according to data compiled by Bloomberg. The naira depreciated 0.6 percent last week, snapping two weeks of increases.

Central bank Governor Lamido Sanusi said Oct. 31 he may lower the official exchange rate to 155-156 per dollar, as oil prices decline and demand for imports surges. The central bank aims to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions. The naira’s marginal rate, used as the prevailing exchange rate, was 152.81 per dollar at the last sale on Nov. 9

“We continue to observe naira volatility as the CBN struggles to bridge the gap between supply and demand,” Rand Merchant Bank analysts, Celeste Fauconnier and Nema Ramkhelawan- Bhana in Johannesburg, wrote in a report today. “While the CBN has intervened aggressively in the past to preserve the currency within a desired trading range, it recently expressed its unwillingness to defend the naira at all costs raising questions about the CBN’s ability to maintain currency movements” within the target band.

Ghana’s cedi depreciated 0.4 percent to 1.6204 per dollar as of 10 a.m. in Accra, according to data compiled by Bloomberg.

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net