Naira Extends Worst Week in 18 Months as Funds Exit

Nigeria’s naira fell for a fourth day against the dollar, extending its worst weekly performance in 18 months, as foreign investors were said to repatriate funds from gains made in the nation’s capital markets.

The currency of Africa’s biggest crude producer tumbled 0.8 percent to 162.60 a dollar at 3:07 p.m. in Lagos, the commercial capital, taking its weekly decline to 1.8 percent. It’s the worst performance since the five days through Dec. 23, 2011.

Nigeria’s All-Share Index yesterday dropped the most in more than three years as emerging markets from Brazil to India took steps to stem an outflow of capital on concerns developed nations are close to ending an era of unprecedented liquidity. Foreign investors accounted for 43 percent of trades in March and 61 percent in all of 2012, according to the Nigerian Stock Exchange.

“There’s a current high demand for dollars” as “people are taking profits and their money out,” Jide Solanke, an analyst at Lagos-based FSDH Merchant Bank Ltd., said by phone today. “The reserve position is robust, which means the central bank can defend the naira. These are temporary fluctuations.”

Nigeria’s foreign-exchange reserves have risen 9.8 percent this year to $48.5 billion as of June 12, according to Central Bank of Nigeria data. The Abuja-based regulator sold $600 million at currency sales this week, 7.7 percent less than last week. The central bank uses auctions on Mondays and Wednesdays to maintain exchange-rate stability.

Nigeria sold fewer bonds this week than offered at its monthly auction as secondary market yields reached 10-month highs. The Debt Management Office sold 20.8 billion naira ($129 million) of the securities at its June 12 auction, below the 85 billion naira originally offered.

“Certain market participants referring to it as a failed auction,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, Africa strategists at Rand Merchant Bank in Johannesburg, wrote in an e-mailed note today. “Bouts of global risk aversion coupled with profit-taking have dampened the allure of local currency bonds, causing yields to tick up over the last two weeks.”

The yield on Nigeria’s 15.1 percent notes due April 2017 rose to the highest since Aug. 29 in the secondary market on June 11, a day before the auction. Borrowing costs fell 61 basis points to 13.72 percent yesterday, according to data compiled by Bloomberg.

Yields on the nation’s $500 million of Eurobonds due January 2021 declined 17 basis points to 5.182 percent today. Ghana’s cedi was unchanged at 2.0075 in Accra.

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