Oct. 6 (Bloomberg) -- Nigeria’s naira fell to the weakest on record in the interbank market after the currency declined at a central-bank dollar auction and Governor Lamido Sanusi said the naira won’t be defended “at all costs.”
The currency of sub-Saharan Africa’s second-biggest economy lost as much as 1.8 percent to 164.425 per dollar and traded down 1.1 percent to 163.15 by 12:18 p.m. in Lagos, the commercial capital, the weakest since at least 1994, when Bloomberg began compiling the data.
The marginal rate at yesterday’s auction, which is also used as the prevailing exchange rate, weakened to 155.40 naira, the lowest on record. Sanusi made the comment on the currency in an interview on CNBC Africa television yesterday.
“Sanusi’s latest views somewhat represent a break with previous comments surrounding the naira and point to the increased possibility that the central bank is effectively starting to consider a controlled currency devaluation,” Matthew Pearson, the head of African equity products at Standard Bank Plc, wrote in an e-mailed research note 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.
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 government’s budget proposal submitted to lawmakers on Oct. 4. If the 3 percent range is applied to the new 153 target rate, the upper band rises to 157.6, which is still above the present auction rate, Pearson wrote.
To prevent the dollar-naira rate becoming “a one-way and disorderly bet higher, the central bank will have to further tighten liquidity conditions and still provide ample foreign- currency supply at the auctions,” he said.
The central bank sold $400 million at yesterday’s auction, compared with $685.4 million demanded by lenders.
--Editors: Ana Monteiro, Peter Branton
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