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Naira Drops to Three-Month Low on Inflation, Oil-Price Decline

May 16 (Bloomberg) -- Nigeria’s naira retreated to three-month low against the dollar on bets that a rising inflation rate and a decline in oil prices would weigh on its value.

The currency of Africa’s largest oil producer declined 0.4 percent to 158.90 per dollar as of 3:20 p.m. in Lagos, the commercial capital, its weakest on a closing basis since Feb. 14, according to data compiled by Bloomberg.

Inflation accelerated to 12.9 percent in April, the fastest since October 2010, from 12.1 percent in March, the National Bureau of Statistics said yesterday. West Texas Intermediate crude fell as much as 2.3 percent to $91.81 per barrel today, its lowest this year. Nigeria depends on crude exports for more than 95 percent of its foreign income.

“With average monthly oil prices sliding towards $90 per barrel as other exogenous risks such as an Iran strike die down, Nigeria remains particularly vulnerable to an oncoming oil price shock,” Sebastian Spio-Garbrah, head of New York-based DaMina Advisors LLP, a frontier-market risk adviser, said in an e-mailed note today. Declining oil prices expose “the naira to further depreciation of another 5 to 10 percent, implying a dollar versus naira rate of between 163 to a dollar and 166 to a dollar in coming months.”

Nigeria raised its policy rate to a record 12 percent in October to curb inflation and stabilize the local currency. The Central Bank of Nigeria forecast inflation will peak at 14.5 percent in the third quarter before gradually slowing to below 10 percent by the end of 2013.

The inflation rate will put the naira under pressure of depreciation, Bismarck Rewane, chief executive officer of Lagos-based Financial Derivatives Co., said yesterday.

Currency Auction

Nigeria sold $200 million at a foreign-currency auction today, with lenders buying the entire amount on sale, the Abuja-based central bank said today in an e-mailed statement.

The marginal rate, which is also used as the prevailing exchange rate, was 155.70 naira, unchanged from the previous auction on May 14.

Yields on Nigeria’s Eurobonds due 2021 rose nine basis points to 5.591 percent in London.

Borrowing costs on domestic bonds due 2015 gained 19 basis points to 15.22 percent as of May 15, according to data on the Financial Markets Dealers Association website.

Ghana’s cedi was unchanged at 1.9050 per dollar as of 3:15 p.m. in the capital, Accra.

To contact the reporter on this story: Emele Onu in Lagos at

To contact the editor responsible for this story: Dulue Mbachu at

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