Naira Erases Loss as Central Bank Says Can Sell More DollarsChris Kay
Nigeria’s naira erased its loss after the West African nation’s central bank governor said the regulator can sell more dollars if it needs to.
The currency of Africa’s biggest oil producer fell as much as 0.1 percent before halting the decline to trade little changed from yesterday at 158.63 per dollar by 3:33 p.m. in Lagos, the commercial capital. That brings its depreciation this year to 1.6 percent, according to data compiled by Bloomberg.
Central Bank of Nigeria Governor Lamido Sanusi said the regulator can sell more dollars to ensure the stability of the naira. He spoke to reporters in the capital, Abuja, after the bank’s Monetary Policy Committee meeting, where it kept its benchmark interest rate at a record high of 12 percent for a ninth consecutive meeting.
“This committee has always said that exchange-rate stability is integral to our price stability mandate,” Sanusi said. “If we see the naira pushing any of the limits we will step in to keep it there, we have the ammunition to do so.”
Nigeria’s foreign-exchange reserves have increased 9 percent this year to $48.3 billion by March 15, according to data compiled by the central bank. Reserves have risen due to oil and gas sales, as well as reduced funding at auctions of foreign currency, Sanusi said.
The central bank sold $300 million to lenders yesterday, higher than the $180 million sold a week ago and the most at a single sale since Dec. 19, it said in an e-mailed statement.
The regulator uses the twice-a-week 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. The bank cut total sales by 6 percent last week to $360 million.
Since reaching a record low on Feb. 20, the yield on the 2022 bond has increased 120 basis points to 11.62 percent, according to yesterday’s prices compiled by Bloomberg.
“With a continued selloff in local bonds in recent weeks, arising in part from reduced foreign interest in the local bond market, the naira may experience more volatility than usual in the short term,” Ridle Markus and Dumisani Ngwenya, analysts at Absa Capital in Johannesburg, wrote in an e-mailed note today. The trend “is unlikely to be sustained amid the improved inflation backdrop.”
Inflation accelerated to 9.5 percent in February from 9 percent a month earlier, the statistics agency said on March 17. Sanusi said on Jan. 25 it will be “very difficult” to keep the rate in the regulator’s target of less than 10 percent for the rest of the year.
Yields on Nigeria’s $500 million of Eurobonds due January 2021 climbed three basis points, or 0.03 percentage point, to 4.341 percent.
Ghana’s cedi weakened for a sixth day, slipping 0.1 percent to 1.9365 per dollar in Accra.