The naira weakened to a 10-week low after dollar demand shot up on bets it may further decline with the end of central bank foreign-currency auctions for the year.
The currency of Africa’s biggest oil producer declined more than 2 percent in interbank trading to 163.25 per dollar as of 4:20 p.m. in Lagos, the weakest since Oct. 10, according to data compiled by Bloomberg. Nigeria sold $200 million at a foreign-currency auction today, less than the $218 million demanded by lenders, the central bank said. It was the sixth auction at which demand wasn’t met.
There is speculation the central bank may also stop direct dollar sales to lenders after today’s end of the twice-weekly auctions, “so there is a rush to buy the foreign currency by dealers,” Tunde Ladipo, chief executive officer of Lagos-based Valuechain Investment Ltd., which trades currencies, said by phone today. “The central bank has slowed its intervention since last week, with the market sustained mainly by the year-end dollar sales of oil companies.”
Nigeria lowered the midpoint of its exchange-rate band at the auctions on Nov. 21 to 155 naira per dollar from 150 naira as rising imports and weakening oil prices increased pressure on the currency. Sub-Saharan Africa’s second-biggest economy depends on oil exports for more than 95 percent of foreign income, according to the Finance Ministry.
The official currency auction will close for the year after today’s sale and will reopen in January, Muhammed Abdullahi, a spokesman for the central bank in Abuja, said on Dec. 19.
Ghana’s cedi was unchanged at 1.6395 per dollar as of 4:20 p.m. in Accra, the nation’s capital.