Bloomberg News

Nigeria’s Naira Declines as Year-End Sales Fuel Dollar Demand

December 06, 2011

Dec. 6 (Bloomberg) -- Nigeria’s naira weakened against the dollar on speculation that demand for the U.S. currency will be fueled by year-end sales.

The currency of Africa’s biggest oil producer depreciated as much as 0.3 percent, before trading 0.2 percent lower at 161.4 as of 11:07 a.m. on the interbank market in Lagos, according to data compiled by Bloomberg.

“Nigeria being an import-dependent economy would always have exchange issues; demand for dollars always pressurizes the local currency,” Sola Fadahunsi, an analyst at GTB Asset Management Ltd. in Lagos, said in an e-mailed reply to questions today. The naira will weaken as “Nigerians would need dollars to bring in stuff for year-end sales and companies will want to bolster their dollar positions against 2012.”

The Central Bank of Nigeria on Nov. 21 lowered the midpoint of its exchange-rate band at its twice-weekly auctions to 155 naira per dollar from 150 naira. Rising imports and weakening oil prices, the source of more than 95 percent of Nigeria’s foreign-exchange income, mounted pressure on the bank.

The central bank sold $200 million at a foreign-currency auction yesterday, less than the $229 million demanded by lenders. The marginal rate, which is also used as the prevailing exchange rate, depreciated by 0.1 percent to 156.50 per dollar, compared with the previous auction on Nov. 30, the Abuja-based bank said. The last time lenders’ demand was met was Nov. 16.

“I do not foresee a drastic plunge,” said Fadahunsi. “Don’t think the authorities would just sit by and let that happen; a plunging local currency is not the best signal to foreign investment.”

Ghana’s cedi slipped 0.2 percent to 1.6295 per dollar as of 10:09 a.m. in Accra.

--Editors: Ash Kumar, Peter Branton

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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