Bloomberg News

Naira Falls to Record Low on Plan for Weaker Exchange Rate

October 05, 2011

Oct. 5 (Bloomberg) -- Nigeria’s naira depreciated against the dollar to the weakest level on record after the government outlined plans to adopt a weaker exchange rate in calculating its budget for next year.

The currency of Africa’s biggest oil producer retreated 1.3 percent to 161.5 per dollar in the interbank market by 4:31 p.m. in Lagos, the commercial capital, the weakest since at least 1994 when Bloomberg started compiling the data. Nigeria’s central bank sold $400 million at a foreign currency auction today, compared with $685.4 million demanded by lenders, at 155.40 naira.

The “naira remains under pressure as dollar demand for imports continuously exceed supply,” Usman Onoja, chief executive officer of Lagos-based Lovonus Trust and Investment Ltd., which trades currencies, said by phone today.

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 the first time on Sept. 26, with today’s rate the weakest on record at 3.5 percent above 150 naira.

Nigeria plans to raise spending by 7 percent to 4.8 trillion naira ($30 billion) in 2012 in its budget, increasing funding for capital projects, according to a three-year plan sent to parliament in Abuja yesterday by the Budget Office. The West African nation will estimate its revenue using a crude-oil price of $75 a barrel and an exchange rate of 153 naira per dollar, weaker than the current 150 naira, according to the document.

The currency won’t be defended “at all costs,” central bank Governor Lamido Sanusi said today in an interview on CNBC Africa. “There is no definite change in foreign exchange policy at present, but the central bank is weighing all the options,” he said.

--Editors: Dulue Mbachu, Emily Bowers.

To contact the reporter on this story: Emele Onu in Johannesburg at eonu1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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