Sept. 30 (Bloomberg) -- Nigeria’s naira depreciated to the weakest level on record against the dollar in interbank trading on mounting demand for foreign currency.
The currency of Africa’s biggest oil producer retreated for a fifth day, losing 0.2 percent to 159.9 per dollar by 1:13 p.m. in Lagos, the commercial capital. That’s the lowest since 1999, when Bloomberg started compiling the data. The naira has retreated 4.9 percent this quarter, the biggest drop over a similar period since the three months through March 2009.
The central bank has been using foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions. It broke that band on Sept. 26, reaching 155.02. Demand for dollars is set to increase as the government invests in improving infrastructure, further weakening the naira, FBN Capital Ltd. said on Sept. 28.
“We do not think that the authorities are comfortable with a floating exchange rate,” FBN said today in an e-mailed note. “There remains a strong intellectual preference for a managed rate.”
Foreign reserves were at $32.58 billion on Sept. 28, a 7 percent decline from a year earlier, according to figures published by the central bank. Prices for crude oil, which accounts for more than 95 percent of export earnings, according to the Finance Ministry, were today heading for their biggest quarterly drop since 2008. Crude for November delivery on the New York Mercantile Exchange fell as much as 1.2 percent, to $81.15 a barrel.
Nigeria sold $700 million to lenders at the last auction on Sept. 28, the most since Dec. 15 and a little less than the $703 million demanded. It was the 23rd auction at which demand wasn’t met, with the above-average volume reflecting demand ahead of Oct. 3, a public holiday, when there’ll be no auction, according to FBN Capital.
Nigeria’s central bank raised its benchmark interest rate on Sept. 19 for the fifth time this year by 50 basis points to 9.25 percent to curb inflation and support the naira. The inflation rate fell for a second month to 9.3 percent in August, the lowest level in more than three years, from 9.4 percent a month earlier, the National Bureau of Statistics said on Sept. 14.
--Editors: Dulue Mbachu, Ana Monteiro
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