Nigeria Denies Plan to Devalue Naira, Blames Dealers for ‘Panic’

The global market turmoil sparked by the coronavirus contagion and this week’s collapse of oil prices amid a battle for market supremacy between Saudi Arabia and Russia have raised pressure on the currency of Africa’s top oil producer, which relies on crude for 90% of its exports.

The naira slipped 0.17% in offshore trading on Friday morning to 369.03 per dollar, its weakest level since March 1994, when Bloomberg started tracking the data. On the black market, it tumbled to 400, according to abokiFX.com, which collates rates from street-traders in Lagos, the nation’s commercial hub.

‘Political Rhetoric’
Market analysts said the sharp falls suggested traders had little confidence in the regulator. “The black market went haywire because people were panicking as they expect the worst from the central bank,” said Michael Famoroti, chief economist with Stears Data in Lagos. “The language is political rhetoric,” he said. “The bank wants to blame investors and dealers for the sell-off.”

The central bank and the Nigerian Financial Intelligence Unit will probe “unscrupulous” market players for creating panic by spreading rumors of a devaluation, according to the bank’s statement. “The full weight of our rules and regulations will be meted out to them, including, but not limited to, being charged for economic sabotage.”

Agents of the Economic and Financial Crimes Commission, wearing their identifying red vests, raided a hotel and currency exchange houses in the northern city of Kaduna for currency hoarding, the commission said on its Twitter account, posting photos of the search.

It said the monetary authority still has enough fire-power to mitigate a reduction in capital inflows caused by lower oil prices. “The size of Nigeria’s foreign exchange reserves remains robust and comfortable,” the bank said. “As such, the CBN remains able and willing to meet all genuine demand for foreign exchange for legitimate transactions.”

The central bank could be forced to mark down the naira by as much as 15% during the third quarter, according to a majority of participants in a Bloomberg survey of analysts and investors released Thursday.

To keep the naira stable, central bank Governor Godwin Emefiele has burned through a quarter of the nation’s reserves since June. He’s also restricted some importers’ access to hard currency and stepped up the sale of high-yielding government debt known as OMO bills.

Source: Bloomberg Business News