Naira falls to record low 1.2 percent to N176 per dollar

The nation’s currency, the naira, continued its falling spree yesterday as it went down 1.2 percent to N176 per dollar, making the fourth day of decline. This is against N174.15 that it exchanged the previous day.
The Nigerian Stock Exchange All Share Index (ASI) also lost 2.1 percent to 33,428.76 in the worst performance among 93 primary indexes tracked by Bloomberg.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is meeting next week to review interest rates in Africa’s biggest economy.
The selloff came as investors weighed potential outcomes of an Organisation of Petroleum Exporting Countries meeting next week, with Morgan Stanley saying a production cut looks increasingly likely.
Nigeria is an OPEC member and crude oil exports account for about 70 percent of government revenue.
Foreign reserves dropped 2 percent this month, as the CBN sold dollars to lenders to stem the naira’s slide. The regulator may increase its key rate from 12 percent next week to support the currency, according to ETM Analytics.
“Expectations are rising that the bank will throw in the towel and hike policy rates, given the seeming futility of trying to keep the naira from depreciating,” Gareth Brickman, a Johannesburg-based Africa analyst at ETM, said in a note to clients.
Ayodele Ebo of Afrinvest said that the benign Core inflation which provides a basis for the CBN’s monetary policy will offer some succor to MPC members at the next meeting.
“Nevertheless, we believe the CBN may choose to opt for monetary tightening by increasing the CRR on private sector deposit by a minimum of 200bps. Our expectation anchored by the recent volatility of the naira within the last few weeks.
Considering the recent depreciation of the naira to an all-time low of N176/US$1.00, the prospective pressure at the interbank market and the import dependent nature of the Nigerian economy, we expect a domino effect on core index within the next two months. Additionally, the CBN’s recent policy, limiting the remunerable amount at the SDF to N7.5bn has eased liquidity within the banking system and may constitute a prospective headwind to price stability”, Ebo said.
However, Inflation has slowed to 8.1 percent in October from 8.3 percent the previous month.
“I don’t think anything they can do at this point would significantly affect the naira,” Seun Olanipekun, an analyst in Lagos at Investment One Financial Services Ltd., told Bloomberg by phone. “Everything hinges on oil prices.”
The NSE all-share gauge dropped 5.5 percent this week, the worst African performer among global indexes tracked by Bloomberg. That almost erases last week’s 6.5 percent gain.
“People have been taking profits based on their gains last week,” Ebo said by phone. “What’s responsible is the weak macro picture.”
source: sun news