Nigerian Naira weakens as Nigeria’s GDP growth slows in 2nd quarter on oil outages

Naira weakens as Nigeria’s GDP growth slows in 2nd quarter on oil outages

Nigeria’s naira weakened to a fresh 20-month low against the U.S. dollar on the interbank market on Friday, as direct central bank forex sales to lenders failed to meet demand, traders said.

The naira closed at 164.1 to the dollar, compared with a 163.6 close on the previous day. The local currency fell to 163.7 to the dollar on Aug. 29, its weakest level since Dec. 22, 2011 when it ended at 164.5 to the dollar.

The central bank sold dollars to some lenders directly towards the end of trading but the volume was not enough to calm the market and support the local currency, traders said.

Nigeria’s central bank in July hiked the cash reserve requirement for public sector deposits to 50 percent from 12 percent, in a bid tighten naira liquidity and shore up its value.

Strong demand for dollars by offshore investors selling off local debt and stocks has added pressure on the local currency, Reuters reports.

The central bank said on Tuesday it would resist pressure to devalue the naira since it has ample foreign exchange reserves to defend the currency.

Also the Nigerian economy grew at a slower rate in the second quarter than the previous quarter, as oil output slipped due to theft and pipeline shutdowns, data showed on Friday.

The Nigerian economy grew 6.18 percent year-on-year in the second quarter, a touch lower than the previous quarter’s 6.56 percent, the National Bureau of Statistics (NBS) said.

Crude oil output averaged 2.11 million barrels per day (bpd), down from 2.29 million bpd in the first quarter.

“While the oil sector experienced production challenges, the non-oil sector output increased in the second quarter,” the NBS quarterly report said.

“The non-oil sector growth was driven by growth in activities recorded in the agriculture, airlines, hotels ands restaurants, as well as building and construction sectors.”

Nigeria is growing as an investment destination due to its huge potential consumer population of almost 170 million and improved fiscal and monetary stability, Reuters reports.

However, its oil industry is being hampered by theft and to a lack of fresh investment due to the delay of a key energy law, which has been in political dispute for years.