BLBG:Naira Falls For Second Day On Europe Debt Concerns As Oil Drops
Nigeria’s naira depreciated for the second day against the dollar over concern of a deepening European debt crisis and as oil, the country’s key export, slumped.
The currency of Africa’s biggest oil producer declined 0.1 percent to 159.35 per dollar as of 11:52 a.m. in Lagos, the commercial capital. The naira, which has hovered at a three- month low for two days, has gained 1.9 percent this year, the second-best performer among African currencies, according to data compiled by Bloomberg.
Pressure on the naira “came from a natural reaction to the re-emergence of crisis in Europe,” Central Bank of Nigeria Governor Lamido Sanusi said yesterday after the Abuja-based regulator left its benchmark interest rate on hold for a fourth consecutive meeting at a record 12 percent.
European leaders are meeting in Brussels today to discuss the region’s debt crisis that has wiped more than $4 trillion from equity markets worldwide this month. Economic growth in Nigeria slowed to 6.17 percent in the first quarter, compared with 7.13 percent in the same period last year, on weak economic activity and lower demand after a strike in January shut businesses across the country.
The central bank recognizes “possible pressure from the softer oil price,” Gregory Kronsten, head of macroeconomic research at FBN Capital Ltd. in London, wrote in a note to clients today. “We see pressure from the pick-up in petroleum product imports after a lull, and a likely adjustment to the central point in the exchange-rate band in second half.”
Inflation
The central bank on Nov. 21 lowered the midpoint of its exchange-rate band at its bi-weekly foreign exchange auctions to 155 naira per dollar from 150 naira as rising imports and weakening oil prices increased pressure on the currency.
Inflation, which accelerated to 12.9 percent in April after the government partly removed fuel subsidies, boosting gasoline costs, may increase after Nigeria implements new electricity tariffs from June 1, which will see middle-income consumers pay 45 percent more, Sanusi said. The central bank estimates inflation will peak at 14.5 percent in the third quarter, before moderating.
Yields on Nigeria’s $500 million of dollar bonds due 2021 snapped two days of declines, rising three basis points to 5.6162 percent. Borrowing costs on naira bonds due 2015 slipped two basis points to 15.26 percent, according to May 22 data compiled by the Financial Markets Dealers Association.
Ghana’s cedi depreciated for a second day by less than 0.1 percent to 1.8938 per dollar in Accra, the capital.
To contact the reporters on this story: Emele Onu in Lagos at eonu1@bloomberg.net; Chris Kay in Abuja at ckay5@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
