The naira weakened a second day and equities headed for biggest drop since 2010 as the Central Bank of Nigeria’s measures to protect the naira from falling oil prices stifled trading.
There were nine trades in the naira between 9 am. and 12:30pm in Lagos on Tuesday, compared with 122 in the same period four weeks ago, according to data compiled by Bloomberg from at least 39 local and international banks.
The naira weakened 0.8 per cent to 185 per dollar, extending losses over the past three months to 11 per cent, the most of 24 African currencies tracked by Bloomberg.
The CBN had, in December, told banks to clear foreign exchange positions daily, having previously allowed them net-open positions of one per cent of shareholder funds.
The move has made it difficult for non-Nigerian investors to exit their holdings, according to the Head, African Strategy, Standard Chartered Plc, Samir Gadio.
“For those who remain in Nigeria, it’s become virtually impossible to get out. There’s a risk that these measures last as long as the central bank feels it doesn’t have the ability to control the exchange rate.”
Calls to the mobile phones of a CBN spokesman, Ibrahim Mu’azu, weren’t picked up and he didn’t immediately respond to e-mailed questions.
Mu’azu, had, however, last month said that the CBN steps were short-term measures to stabilise the market.
Nigeria, which relies on oil for 70 per cent of its budget and over 90 per cent of exports, has been battered by Brent crude prices which has halved since June to under $52 a barrel.
On November 25, 2014, the CBN raised interest rates to a record 13 per cent and devalued its target exchange rate for the naira to five per cent either side of N168 per dollar.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, has proposed cutting this year’s budget by eight per cent.
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