Devaluation Threat Seen Rising after election shift
The naira retreated as much as 1.5 percent to 199.10 per dollar before paring losses to trade at 199.01 by 11:12 a.m. in Lagos. The currency is depreciating for a seventh day to the weakest level since Bloomberg started compiling the data in January 1999, extending losses this year to 7.8 percent, the most among 24 currencies tracked by Bloomberg.
“Traders are seeing higher uncertainties in the market with the postponement of the election,” Lanre Buluro, head of research at Primera Africa Securities Ltd., said by phone from Lagos. “There is speculation on the naira with many buying dollars in anticipation of imminent devaluation before the election or after.”
Investors are delaying decisions to commit money to Nigeria as escalating violence by the Islamist group Boko Haram in the country’s northeastern region prompted the electoral commission to push back the vote by six weeks to March 28. Government opponents said the move will give President Goodluck Jonathan extra time to rally support that has been dwindling as a collapse in the price of oil hits the revenue of Africa’s biggest crude exporter.
Nigeria’s central bank have reduced foreign-exchange reserves to a three-year low in a bid to defend the naira with dollar sales. In November, policy makers weakened the midpoint of the official exchange rate to 168 per dollar from 155 and raised the benchmark borrowing cost to a record 13 percent.
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