Nigeria Faces Oil Challenge as Naira Slumps Seventh Week

Slumping oil prices may curb Nigeria’s ability to keep supporting the naira, which fell for a seventh week in the longest stretch in three years, according to Standard Chartered Plc.
The currency of Africa’s biggest oil producer weakened as much as 0.5 percent today and traded less than 0.1 percent lower at N164.62 per dollar in Lagos, taking the decline since October 3 to 0.2 percent. Prices for Brent crude and West Texas Intermediate slid. Since mid-September, the Central Bank of Nigeria has been selling dollars outside of its twice-weekly auctions as the country heads toward an election in February, said Samir Gadio, Standard Chartered’s chief African strategist.
“There’s an expectation that, no matter what, the exchange rate will be defended until the elections,” Gadio, based in London, said by phone today. “For how long is that sustainable? If the oil price rebounds, it’s fine. But if it remains where it is, we’ll have a problem at some point and the foreign-reserve position will deteriorate.”
Nigeria’s reserves retreated 9.5 percent this year to $39.5 billion by October 2 as the central bank sold dollars to shore up the naira, which weakened 2.7 percent against the U.S. currency in 2014. President Goodluck Jonathan hasn’t said whether he would seek a second term in office in an election set for February.
Calls made to the office and mobile phone of Ibrahim Ma’uzu, a spokesman for the Abuja-based central bank, didn’t connect. The institution sells dollars outside of its Monday and Wednesday auctions when the interbank market is going “haywire,” Charles Mordi, director of research at the bank, said on September 30.
“A drop in forex inflows will put pressure on reserves and affect the ability of central bank to continue to support the currency,” Kunle Ezun, an analyst at Ecobank Transnational Inc. in Lagos, said by phone.

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