Nigerian Naira Drops Most in More Than Week as Bank Cuts Supply
The naira depreciated the most in more than a week after Nigeria’s central bank sold the smallest amount of dollars in a month at an auction.
The currency of Africa’s largest oil producer declined 0.1 percent to 157.09 per dollar as of 3 p.m. in Lagos, the commercial capital, its biggest retreat on a closing basis since Nov. 27. The naira has risen 3.3 percent this year, the second- best performance among African currencies tracked by Bloomberg.
The Central Bank of Nigeria sells dollars to lenders at foreign currency auctions on Mondays and Wednesdays to help manage the exchange rate. The regulator sold $66 million at its auction today, the lowest since Nov. 12 sale.
“A slight depreciation” is expected in response to the decline in central bank supply “but we have seen inflows which would be supporting the naira,” Augustus Nwachukwu, analyst at Lagos-based Stanbic IBTC Holdings Co., said by phone today.
The naira’s appreciation can be traced to tight monetary conditions, improved supply of foreign exchange to the market by oil companies and increased inflows from portfolio investors, central bank Governor Lamido Sanusi said Nov. 20, after the regulator held its benchmark rate at a record-high 12 percent.
Inflation, which accelerated for the first time in four months to 11.7 percent in October on widespread flooding of farms, is still above the bank’s target of less than 10 percent
The yield on 16.39 percent naira debt due January 2022 rose two basis points to 12.03 percent, according to Dec. 7 prices on the website of the Lagos-based Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 was little changed at 4.183 percent.
Ghana’s cedi depreciated by 0.1 percent to 1.8935 a dollar in Accra, the capital.
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