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Nigeria’s Naira Declines as Central Bank Leaves Rates Unchanged

Nigeria’s naira weakened as the central bank kept the benchmark interest rate on hold to counter accelerating inflation.

The currency of Africa’s biggest oil producer slipped less than 0.1 percent to 157.9 a dollar at 3:20 p.m. in Lagos, the commercial capital, after gaining 0.4 percent yesterday, the most since Oct. 4, according to data compiled by Bloomberg.

The Central Bank of Nigeria, led by Governor Lamido Sanusi, left the rate unchanged at a record 12 percent today at the monetary policy committee’s final meeting this year, meeting the expectations of all 13 economists surveyed by Bloomberg. The inflation rate, which rose to 11.7 percent in October on widespread flooding of farms, is still above the bank’s target of less than 10 percent.

“The MPC will not ease until it is more comfortable with the future direction of inflation and less anxious about the global landscape,” Gregory Kronsten, the London-based head of economic and fixed-income research at FBN Capital Ltd., wrote in an e-mailed note to clients today.

Sanusi is trying to curtail price increases and bolster the naira to curb import costs by keeping interest rates higher and boosting capital reserve requirements for banks. Sanusi lifted a requirement last year for foreign investors to hold local- currency debt for at least one year.

“The naira outlook remains uncertain over the medium term and will continue to be affected by strong import demand, a structural imbalance between dollar supply and demand and acceleration in inflation,” Ecobank Transnational Inc. (ETI) analysts, led by Paul-Harry Aithnard in Paris, wrote in a research note today.

Borrowing Costs

Yields on 10-year naira debt fell 14 basis points to 12.46 percent, according to yesterday’s prices compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 declined two basis points to 4.4 percent today.

The Debt Management Office is scheduled to sell 50 billion naira ($316 million) of 10-year and 7-year bonds tomorrow. The central bank is offering 116.18 billion naira of Treasury bills in two days.

Ghana’s cedi snapped three days of gains, dropping 0.5 percent to 1.8868 in Accra, the capital.

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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