Naira Falls to Weakest in Two Months on Inflation Concern
Nigeria’s naira depreciated to the weakest in two months against the dollar after the country’s inflation accelerated.
The currency of Africa’s largest oil producer declined 0.1 percent to 158.125 per dollar as of 5:01 p.m. in Lagos yesterday, its weakest since March 12, according to data compiled by Bloomberg.
Inflation accelerated to 12.9 percent in April, the fastest since October 2010, from 12.1 percent in March, the National Bureau of Statistics said today. The Central Bank of Nigeria, which raised its policy rate to a record 12 percent in October, forecast inflation will peak at 14.5 percent in the third quarter before gradually slowing to below 10 percent by the end of 2013.
“The inflation rate will put the naira under pressure of depreciation,” Bismarck Rewane, chief executive officer of Lagos-based Financial Derivatives Co., said by phone today. “The central bank may want to fight inflation by holding the rate at the current level as increasing it further will be counter-productive.”
“We expect inflation to peak at about 13.5 percent in July, owing largely to the secondary effects of the partial removal of fuel subsidies earlier this year,” Absa Capital strategists, led by Ridle Markus in Johannesburg, wrote in a report today.
Yields on Nigeria’s Eurobonds due 2021 declined by four basis points to 5.514 percent inLondon.
Borrowing costs on domestic bonds due 2015 gained four basis points to 15.03 percent as of May 14 data on the Financial Markets Dealers Association website.