Naira Advances Second Day as Central Bank Holds Rate
The currency of Africa’s biggest oil producer slipped as much as 0.4 percent, the most since Jan. 15, to 157.75 a dollar, and traded less than 0.1 percent weaker at 157.2 by 3:06 p.m. in Lagos, the commercial capital. The naira advanced 3.9 percent last year, the strongest performer in Africa, according to data compiled by Bloomberg.
The bank’s Monetary Policy Committee left the policy rate at 12 percent, Governor Lamido Sanusi told reporters yesterday in the capital, Abuja. Inflation, which slowed to 12 percent in December, is still above the central bank’s target of less than 10 percent. Sub-Saharan Africa’s second-largest economy remains at risk to shocks that could arise from lower crude demand and a weaker exchange rate as well as price pressures from higher government spending, Sanusi said.
“There are high expectations that the president will soon sign the 2013 budget bill, which will open spending on various capital projects, thereby increasing liquidity,” Ecobank Transnational Inc. strategists, led by Paul-Harry Aithnard, wrote in an e-mailed note to clients today. The central bank left rates unchanged “due to still high inflation” and “to support the naira,” the analysts wrote.
Nigeria’s legislature approved a 4.98 trillion-naira ($31.7 billion) budget for 2013 in December, 7 percent higher than this year, and raised the benchmark oil price in this year’s budget by $4 to $79 a barrel, giving more funds to the government for spending. The budget will be based on an exchange rate of 160 naira a dollar. President Goodluck Jonathan hasn’t yet signed the budget or rejected it.
“The CBN’s target is to bring consumer price inflation to single digits,” Melissa Verreynne, an analyst at NKC Independent Economists in Paarl, South Africa, wrote in e-mailed comments. “Since it has not yet succeeded in doing so, a reduction in the MPR rate at this point could mean that the CBN loses some credibility in its fight to uphold price stability.”
Eight members of the MPC voted to keep the rate at 12 percent, Sanusi said, with two voting to reduce it by 25 basis points.
Yields on naira debt due 2022 fell six basis points to 11.19 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 were little changed at 3.722 percent today.
Ghana’s cedi weakened 0.1 percent to 1.9095 a dollar in Accra, the capital.
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