Naira Extends Largest Monthly Drop Since February: Lagos Mover

The naira weakened against the dollar, extending its worst monthly performance since February, amid speculation foreign investors sold Nigeria’s debt and as oil prices declined.

The currency of the Africa’s biggest crude producer dropped for a second day as emerging-market stocks fell, heading for the biggest monthly loss in a year. Yields on the 16.39 percent domestic bonds due January 2022 rose to a one-month high yesterday, according to data compiled by Bloomberg.

“It looks as if the global risk-off environment is feeding into Nigerian assets, broadly in line with what other emerging markets are experiencing,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed reply to questions today. “As local market players witness the shift in the offshore positioning, they are also likely to push dollar-naira higher.”

Nigeria’s currency weakened 0.1 percent to 158.63 per dollar at 1:17 p.m. in Lagos, the commercial capital, taking its monthly decline to 0.4 percent.

The yield on the 2022 securities rose 23 basis points, or 0.23 percentage point, to 11.86 percent yesterday, the highest since April 29, according to the data compiled by Bloomberg.

Bonny Light crude, one of Nigeria’s main export grades, fell for a third day, dropping 0.6 percent to $103.41 per barrel. Nigeria depends on oil shipments for 80 percent of government revenue and 95 percent of its export income.

Indian Slowdown

The MSCI Emerging Markets Index fell 0.9 percent, declining for a third day and set for a 3.2 percent drop since April 30. Stocks slid after data showed India’s economy grew less than 5 percent for a second quarter and amid speculation that data tomorrow will show a slowdown in Chinese manufacturing.

The Abuja-based central bank sold $371.71 million to lenders this week, down 32 percent from last week, after one of the regular auction dates on May 29 didn’t go ahead due to a public holiday. The Central Bank of Nigeria uses the auctions to stabilize the naira as the cost of importing refined fuel, which accounts for 70 percent of the local gasoline market, boosts dollar demand and puts pressure on the currency.

“If the currency slides beyond 159 to 160, we expect the CBN to intervene in the market to stabilize the exchange rate,” said Gadio.

Yields on the nation’s $500 million of Eurobonds due January 2021 declined 12 basis points to 4.608 percent today.

Ghana’s cedi fell less than 0.1 percent to 1.9975 per dollar in Accra, taking its monthly retreat to 1.2 percent.

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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