Naira Weakens to Lowest This Month on Import Demand, Oil DeclineEmele Onu
Nigeria’s naira depreciated for a second day and reached its lowest this month as importers demanded dollars to pay gasoline bills and as oil, the country’s key export, retreated.
The currency of Africa’s biggest oil producer eased 0.4 percent to 158.33 per dollar by 3:34 p.m. in Lagos, the commercial capital, its weakest since Feb. 28, according to data compiled by Bloomberg.
Nigeria relies on imports to cover 70 percent of its own fuel needs because of inadequate refining capacity, and those shipments into the country are a source of pressure on the naira, according to the central bank. Bonny Light Crude, the nation’s main export grade, slid for a second day, dropping 0.4 percent to $113.14 in New York. Oil dropped as China’s industrial production trailed estimates and after Saudi Arabian crude output climbed from a 20-month low last month.
“We’ve seen increase in dollar demand from oil importers and dealers bringing in consumer goods,” Abubakar Mohammed, chief executive of Lagos-based Forward Marketing Bureau de Change Ltd., said by phone. “The outlook of the crude oil market is also important for the naira exchange rate.”
Foreign-currency reserves in Africa’s most populous country rose to $47.56 billion, the highest level since at least 2010, the Central Bank of Nigeria in Abuja said in a March 4 statement on its website.
The steady increase since early 2012 means the central bank has “enough ammunition” to address a temporary demand-supply mismatch in the foreign-exchange market, Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd., Africa’s largest bank by assets, said in e-mailed comments today.
The central bank sold $180 million at a foreign currency auction today, compared with $150 million at the previous sale on March 6, the regulator said in an e-mailed statement. The bank sells dollars to lenders on Mondays and Wednesdays to help stabilize the naira.
“The CBN will probably remain broadly comfortable with the mild uptick in USD/NGN and will not rely on the interest-rate mechanism to tighten naira liquidity,” Gadio said.
The central bank held its benchmark rate at a record high 12 percent for an eighth time on Jan. 21 to control consumer prices and stabilize the local currency. The inflation rate fell to 9 percent in January from 12 percent in December, the statistics bureau said on Feb. 18.
Yields on Nigeria’s $500 million of Eurobonds due January 2021 fell 16 basis points, or 0.16 percentage point, to 4.1 percent.
The yield on the country’s 16.39 percent domestic bonds due January 2022 rose 25 basis points to 11.26 percent, according to March 8 data compiled on the Financial Markets Dealers Association website.
Ghana’s cedi gained less than 0.1 percent to 1.9201 per dollar in Accra, the capital.