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Naira Falls as Crude Oil Price Declines

By on July 11, 2012

The naira weakened, snapping three days of gains against the dollar as crude, Nigeria’s key export, retreated in New York and London.

The currency of Africa’s biggest oil producer depreciated 0.1 percent to 160.84 per dollar as of 2:57 p.m. on the interbank market in Lagos, the commercial capital, according to data compiled by Bloomberg. The naira has gained 0.9 percent against the dollar this year and 1.1 percent last week.

Oil fell after Norway ended a strike that threatened to halt output by western Europe’s largest crude exporter and as China reduced purchases of the raw material. The naira hit a one-month high yesterday after the Central Bank of Nigeria sold foreign currency at its first of two regular weekly auctions. It isn’t scheduled to sell dollars today.

“Recent naira weakness reflects the fall in global oil prices,” Ecobank Transnational Inc. (ETI)strategists, led by Paris- based Paul-Harry Aithnard, wrote in a note to clients today. Last week’s “appreciation was due to month-end sales from oil companies and increased foreign exchange supply from the CBN.”

Nigeria’s foreign currency reserves have fallen $1.1 billion since the end of May to $36.5 billion, according to July 6 data compiled by the Abuja-based central bank. Nigerian benchmark Bonny Light crude has declined 3.9 percent since the end of May.

The yield on Nigeria’s domestic 15.1 percent bonds due 2017 fell eight basis points to 15.94 percent, according to July 9 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due 2021 rose one basis point to 5.5 percent today.