Bloomberg News

Nigeria’s Naira Weakens Against Dollar on Crude Oil Declines

June 26, 2012

The naira retreated against the dollar on speculation that declines in oil, Nigeria’s key export, may hamper the central bank’s ability to defend the currency.

The currency of Africa’s biggest oil producer depreciated 0.3 percent to 162.65 per dollar as of 3:08 p.m. in Lagos, the commercial capital. The naira has slid 0.2 percent this year after being Africa’s best-performing currency in the first five months.

Nigerian benchmark Bonny Light crude snapped two days of gains, sliding 0.1 percent to $92.18 a barrel, a 28 percent retreat from its March peak this year. Spanish and Italian bonds fell as borrowing costs increased at debt sales today ahead of a gathering of European leaders on June 28-29 in their latest summit meeting to try to stop contagion from the debt crisis.

“Recent naira weakness reflects the fall in global oil prices caused by the impact of the euro zone crisis on the global economy,” Ecobank Transnational Inc. strategists, led by Paris-based Paul-Harry Aithnard, wrote in a note to clients today.

The West African nation’s foreign reserves have fallen $612 million this month to $37.1 billion as of June 22 as the central bank has increased dollar sales at twice-weekly currency auctions and directly to the market to defend the naira.

The yield on Nigeria’s domestic 15.1 percent bonds due 2017 rose to a record high, gaining seven basis points to 15.71 percent, according to the June 25 data on the Financial Markets Dealers Association website.

The Debt Management Office will offer as much as 30 billion naira ($184 million) of the five-year notes at an auction tomorrow.

Yields on the nation’s $500 million of Eurobonds due 2021 fell four basis points to 5.59 percent today.

Ghana’s cedi weakened 0.6 percent to 1.934 per dollar in Accra, the capital.

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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