Nigeria’s Naira Falls for Second Day on Dollar Demand Pressure

Nigeria’s naira depreciated for a second day against the dollar, on higher demand for the U.S. currency in the import-dependent country.

The currency of Africa’s biggest oil producer weakened 0.1 percent to 161.6 per dollar on the interbank market by 11:20 a.m. in Lagos, according to data compiled by Bloomberg.

The Central Bank of Nigeria on Nov. 21 lowered the midpoint of its exchange-rate band at its twice-weekly auctions to 155 naira per dollar from 150 naira. Rising imports and weakening oil prices, the source of more than 95 percent of Nigeria’s foreign-exchange income, mounted pressure on the bank.

“A lack of U.S. dollar liquidity will continue to precipitate naira losses, despite an upward adjustment of the mid-point,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, analysts at Rand Merchant Bank in Johannesburg, wrote in a report today. “The CBN’s regular involvement in the currency market outside of the official auctions has raised market expectations of consistent U.S. dollar supply, causing the naira to spike when the central bank is absent from the market.”

Inflation in Nigeria remains a threat, leaving little room to loosen monetary policy even as the European debt crisis worsens, Central Bank of Nigeria Governor Lamido Sanusi said Dec. 1.

The central bank kept its benchmark rate unchanged at a record high of 12 percent on Nov. 22 after having raised it by 6 percentage points since September last year. The bank increased interest rates 2.75 percentage points in October after inflation climbed above its 10 percent target.

Ghana’s cedi appreciated 0.4 percent to 1.6393 against the dollar, as of 10:26 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

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