Naira Drops to 2-Month Low on Reduced Dollar Supply: Lagos Mover

Nigeria’s naira declined against the dollar on the interbank market, reaching a two-month low and capping the worst week in 12, as foreign inflows and oil company foreign-exchange sales were said to be limited.

The currency of Africa’s biggest oil producer retreated 0.3 percent to 158.525 a dollar, the lowest closing level since Sept. 5, at 2:33 p.m. in Lagos, the commercial capital. The naira retreated of 0.7 percent this week, according to data compiled by Bloomberg.

“It’s a temporary shortfall in supply this week,” Samir Gadio, a London-based emerging markets strategist at Standard Bank Group Ltd., said in an e-mailed reply to questions today. “I don’t think there were significant foreign-exchange sales from oil companies and foreign inflows have been less robust.”

Oil-producing companies, which sell dollars to meet domestic expenses, are the second-biggest source of foreign currency after the central bank, which sells dollars on Mondays and Wednesdays to keep the naira within a 3 percent band around 155 per dollar.

JPMorgan Chase & Co. added the West African nation’s bonds to its benchmark emerging-market index series last month. Barclays Plc followed last week when it said it would also add Nigerian debt to its emerging-market local-currency government bond index from March 2013. Yields on 10-year naira debt have tumbled 348 basis points since August to 12.65 percent, according to yesterday’s prices compiled on the Financial Markets Dealers Association website.

‘Market Confidence’

“We suspect the foreign-exchange market will be more supported next week given the forthcoming fixed-income auctions,” said Gadio. “Foreign-exchange demand is not meaningful and market confidence remains strong.”

The Central Bank of Nigeria sells bills to help manage currency supply within the market. The Abuja-based regulator is offering 116.2 billion naira ($733 million) of bills on Nov. 22. The Debt Management Office is also scheduled to sell 50 billion naira of 10-year and 7-year bonds next week.

The central bank, led by Governor Lamido Sanusi, has left its benchmark interest rate unchanged at a record high 12 percent this year to help support the naira and keep prices low. Sanusi told an investor conference in Lagos yesterday that Nigeria’s food inflation accelerated last month after flooding this year washed away farms.

Annual inflation slowed to 11.3 percent in September from 11.7 percent the previous month. Food prices, which account for more than half of the consumer price index, rose 10.2 percent from a year earlier, compared with 9.9 percent in August. The country’s National Bureau of Statistics is scheduled to release October inflation figures Nov. 19.

Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 were little changed at 4.4 percent today.

Ghana’s cedi gained less than 0.1 percent to 1.8796 a dollar in Accra.

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

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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