Nigeria naira slumps to weakest level in 15 years

Nigeria’s naira declined to its weakest level in at least 15 years as the central bank limited supplies of dollars at its weekly auctions to protect the West African nation’s foreign reserves, according to Citigroup Inc.

The naira slipped to 156.85 per dollar by 11 a.m. Lagos time today, Citibank said in a client note. That’s the weakest level since at least 1994, according to Bloomberg data. Nigeria’s central bank manages the naira exchange rate by controlling the amount of dollars it supplies to commercial lenders at auctions held on the Monday and Wednesday of each weak.

The Central Bank of Nigeria sold $183.7 million to commercial banks at its most recent auction on July 29, below the $604.84 million demanded on that day, Citigroup said in the note. Declines in the naira sparked “panic” sales of naira for dollars by Nigerian businesses “who fear the local currency could dip further and hurt their operations,” the note added.

“The central bank simply isn’t meeting the demand for dollars in Nigeria at its bi-weekly auctions,” Leon Myburgh, a fixed-income and currency strategist for sub-Saharan Africa at Citigroup, said in an interview from Johannesburg. “We suspect it’s because they don’t want to run down their foreign reserves.”

Nigeria’s foreign reserves slumped 19 percent to $43.2 billion on July 3, compared with $53 billion at the end of December, Governor Lamido Sanusi said on July 7. The naira has lost almost a quarter of its value since the end of November last year when the global financial crisis first began, sparking a slump in the price of oil, which accounts for about 90 percent of Nigeria’s export revenue.

Oil traded at $66.92 a barrel in New York today, almost 54 percent below the record $147.27 a barrel it reached in July last year. Nigeria vies with Angola as Africa’s biggest crude exporter, according to OPEC data.

Source: Bloomberg