Written by Josie Cox and Patrick McGroarty | From The Wall Street Journal
Nigeria’s central bank intervened to support its currency on Friday after a record-breaking slide. Traders said the central bank stepped in after the dollar shot up to over 172 against the naira, marking an all-time low for the Nigerian currency driven by concerns that the crumbling oil price will hit Africa’s biggest economy hard.
The naira recovered to around 167 against the buck. A central bank spokesman didn’t respond to calls and text messages seeking comment. Analysts say the naira isn’t out of trouble yet, and warn of a self-reinforcing slide in the currency ahead.
“The central bank may face political pressure not to raise rates ahead of February’s general election,” Capital Economics analyst Jack Allen wrote in a note to clients. “But we think that the threat of a currency crisis is likely to trump these concerns.”
The naira’s drop placed Nigeria among the oil-rich nations hardest hit by a production glut that has prompted a 25% drop in Brent crude prices in recent months. The bruised ruble has also caused headaches for the Russian central bank, while the Norwegian krone and Canadian dollar have also dropped. Oil and natural gas account for 96% of export revenue in Africa’s top producer, and about 80% of government revenue, according to the International Monetary Fund.
Attempting to curtail the damage to its currency, the Central Bank of Nigeria on Thursday sought to temper dollar demand by barring importers of goods including electronics, generators and telecommunications equipment from procuring dollars at its foreign exchange auctions.
Read more at The Wall Street Journal