London - Nigeria’s naira weakened to a record low against the dollar as promises by the central bank to defend the currency and government plans to cut spending failed to stabilise the market hit by a fall in oil prices.
There is “still no reprieve for the naira despite the positive local developments at the start of the week,” Gareth Brickman and Catherine Bennett, Johannesburg-based strategists at ETM Analytics, said in an e-mailed note today.
“It appears the market is still unconvinced with the latest ad hoc tightening measures from the central bank.”
The currency of Africa’s largest crude producer declined a second day, down 1.4 percent to 175.48 against the dollar at 11:42 am in Lagos, the commercial capital.
The nation’s foreign reserves fell to $37.6 billion on November 14, their lowest level since July 1, after central bank interventions to bolster the naira.
Nigeria’s government is planning to cut spending by 6 percent next year and lower its benchmark oil price to $73 a barrel, down from from $77.50 in this year’s budget, Finance Minister Ngozi Okonjo-Iweala said November 16.
Okonjo-Iweala’s announcement followed central bank Governor Godwin Emefiele’s pledge last week to continue defending the naira with interventions.
“Strong dollar demand for imports, the repatriation of profits by companies as well as uncertainty about the ability of central bank to manage the exchange rate is undermining the naira,” Kunle Ezun, a Lagos-based currency strategist at Ecobank Transnational, said by phone.
The “central bank is expected in the market this afternoon to prop up the naira,” he said. - Bloomberg News