The naira weakened to the lowest in more than three months, snapping two days of gains, after demand for dollars increased from oil importers and debt investors.
The currency of Africa’s biggest oil producer depreciated 0.3 percent to 159.25 per dollar, the lowest closing price since Feb. 14, as of 3:42 p.m. in Lagos, the commercial capital. The naira has gained 1.9 percent this year, the second-best performer in Africa.
“The oil importers are getting comfortable and are increasing demand for dollars,” Jide Solanke, an analyst at First Securities Discount House Ltd., said by phone from Lagos today. Investors in local debt are also exiting trades on concern over rising inflation, he said.
Inflation accelerated to 12.9 percent in April, the fastest since October 2010, from 12.1 percent in March, after President Goodluck Jonathan partially reduced subsidies on gasoline in January. Nigeria is a fuel importer because of a lack of refining capacity.
Nigeria’s government is yet to implement recommendations, including the overhaul of the management and board of the state oil company Nigerian National Petroleum Corp. almost a month after a House of Representatives committee probe on possible fraud in fuel subsidy payments was completed. Payments totaling 2.6 trillion naira ($16 billion) in fuel subsidies were made in 2011 through a fraudulent process, the committee said.
The naira weakened 0.7 percent last week, falling the most since Dec. 23.
Last week’s “depreciation was partly due to strong dollar outflow to cover petroleum import bills and repatriation of dividends by foreign investors,” Ecobank Transnational Inc. (ETI) analysts, led by Paris-based Paul-Harry Aithnard, wrote in a note to clients today. “Pressure on the naira will likely be sustained.”
The Central Bank of Nigeria’s Monetary Policy Committee unanimously left the rate at a record high 12 percent for a fourth consecutive meeting, Governor Lamido Sanusi told reporters in the capital, Abuja, today. That was in line with the forecasts of all 14 economists surveyed by Bloomberg.
Oil, Nigeria’s key export, slipped after the Organization for Economic Cooperation and Development trimmed economic growth forecasts in the euro area and Iran agreed to let western nuclear inspectors into the country. Nigerian benchmark Bonny Light crude has slid 16 percent from its March high this year.
“Possible softening of crude oil prices on international markets with potential fiscal revenue loses and the likely pressure on the foreign exchange markets and foreign exchange rates” is a concern, Sanusi said.
Yields on Nigeria’s $500 million of dollar bonds due 2021 fell 18 basis points to 5.5897 percent. Borrowing costs on naira bonds due 2015 slipped two basis points to 15.28 percent, according to May 21 data compiled by the Financial Markets Dealers Association.
Ghana’s cedi fell 0.9 percent to 1.905 per dollar in Accra, the capital, the biggest decline since May 3 on a closing basis.
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