Nigeria’s naira headed for its longest run of weekly declines since December, weakening for a fourth day, as fuel importers demanded dollars and on investors taking profit.
The currency of Africa’s biggest oil producer retreated 0.3 percent to 160.05 per dollar as of 11:22 a.m. in Lagos, the commercial capital, taking its fall this week to 0.7 percent, according to data compiled by Bloomberg. The naira has risen 1.4 percent this year against the dollar.
Nigeria’s Petroleum Products Pricing Regulatory Agency approved a tender for 3.57 million metric tons of gasoline imports into the country for the second quarter in March, with 42 fuel retailers issued permits. The West African nation relies on imports to meet 70 percent of its fuel needs because of inadequate refining capacity, Petroleum Minister Diezani Alison- Madueke said in February.
“It looks like petroleum products import is gathering momentum,” Adedayo Idowu, a Lagos-based analyst at Vetiva Capital Management Ltd., said in e-mailed comments today. “There are reports of repatriation of funds by foreign portfolio investors - largely profit-taking I would assume.”
The Central Bank of Nigeria has stepped up the supply of foreign currency at its twice-weekly auctions. The regulator, based in the capital Abuja, sold $350 million this week at the official windows, matching the amount sold last week, which was the most since March.
Nigeria’s debt costs have soared as the central bank has raised its benchmark interest rate 6 percentage points since 2010 to combat rising inflation and to stabilize the naira.
Yields on naira bonds due 2017 rose three basis points to 15.3 percent, according to May 24 data compiled by the Financial Markets Dealers Association. That’s a jump of more than three percentage points in a year.
Nigeria’s oil production contracted 2.32 percent in the first three months of the year compared with 0.05 percent growth in the same period of last year as production decreased, the National Bureau of Statistics said May 22. The nation’s benchmark Bonny Light crude has slumped 16 percent from a March high this year.
“If production shortages persist and crude oil prices slide further while imports surge, there are risks to the current account position and capital flight pressures, thus elevating currency risk going forward,” said Idowu.
Pressure on the naira is a reaction to the debt crisis in Europe, central bank Governor Lamido Sanusi said May 22 after the Abuja-based regulator left its benchmark interest rate on hold for a fourth consecutive meeting at a record 12 percent.
Borrowing costs on Nigeria’s $500 million of Eurobonds due 2021 fell one basis point to 5.6341 percent.
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