Naira posted a record low closing level against the dollar on Monday, despite central bank intervention to try and halt its slide, which is being driven by worries about the impact of plunging oil prices on the economy.
The central bank sold an undisclosed amount of dollars to commercial banks, but dealers told Reuters it was not sufficient to lift the naira, which closed 2.9 percent weaker than at its previous close on Friday.
The central bank has struggled to keep the naira within its preferred band even after devaluing the currency by 8 percent last Tuesday in a bid to halt a decline in the country’s foreign reserves.
Oil sales provide around 95 percent of foreign exchange.
Advertisement
On Monday the naira touched an intraday low of 184.42 to the dollar before the bank’s intervention. Afterwards, it recovered very slightly to end at 184.10 naira to the dollar, a record low closing level. Downward pressure came partly from concerns that foreign investors would demand dollars to pull out of local assets, dealers said.
The central bank’s target band since the devaluation is 5 percent plus or minus 168 to the dollar, but doubts remain about whether the devaluation went far enough given the likelihood of continuing low oil prices and the fact that Nigeria’s oil savings were being depleted even when crude prices were at a record high.
The coming weeks will test the bank’s ability to maintain that level, as forex reserves are still being run down.
Advertisement
Nigerian Stock Exchange (NSE) all share index fell 1.8 percent on Monday, to close at 33,914.25 basis point from 34,543.05 closing figure on Friday, dragged lower by oil stocks Oando and Seplat.
Pressure on the currency from lower oil prices risks reigniting inflation, which for the past two years has stabilised in single digits for the first time in more than five years.
Add a comment
