Nigeria’s Naira touched a new record low of 183.05 against the US Dollar Monday, driven by concerns over a sustained low oil price and expectations foreign investors would demand more dollars to pull out of local assets, dealers said.
The currency was trading down 2.4 percent from Friday’s closing level.
According to Reuters and TheWill Nigeria, the Central Bank Of Nigeria 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 foreign reserves of Africa’s biggest economy. Oil sales provide around 95 percent of those reserves.
The bank’s target band after devaluation is 5 percent plus or minus 168 to the dollar, but doubts remain about whether it went far enough given the likelihood of continuing low oil prices and the fact that Nigeria’s oil savings were being depleted even during a period of record high crude prices.
The coming weeks will test the bank’s ability to maintain that level — the naira is trading well below it and forex reserves are running out.
Pressure on the currency from lower oil prices risks reigniting inflation, which has stabilised in single digits for the past two years, the first time it has been this low.
Nigeria’s economic troubles come at a bad time for President Goodluck Jonathan, who will seek re-election in polls scheduled for Feb. 2015.
Barclays on Monday lowered its expected average Brent crude price to $72 a barrel for 2015, down from $93 a barrel previously, in a sign analysts have become more bearish following last week’s OPEC meeting, which left supply targets unchanged.
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