Market News

By Emele Onu

• Reduced yield on fixed-income assets trigger investor exit
• Inadequate central bank dollar sales hurt market liquidity

(Bloomberg) -- Nigeria’s naira slipped to a fresh low against the dollar, with analysts blaming thin liquidity as the central bank scaled back intervention and foreign investors took profits on domestic bonds.

Posting its third consecutive day of weakness, the unit closed 0.8% lower on Thursday at 1,639 naira per dollar, according to FMDQ data compiled by Bloomberg.

“Pressure on the naira has built up given a lack of foreign exchange supply,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc in London, who also pointed at offshore investor profit-taking as yields on domestic bonds fell. “Central Bank of Nigeria foreign exchange intervention will be key to stabilizing the naira,” he said.

The naira has lost around 70% of its value against the US currency since foreign exchange controls that had kept it artificially strong were lifted last year.

It found a degree of stability earlier in 2024 after the central bank took steps to shore it up, including aggressively raising interest rates, but has recently been back under pressure.

Reasons range from seasonal dollar demand as wealthy Nigerians take annual vacations to businesses seeking greenbacks to bring in goods in the import-dependent nation.

To ease some pressure, the central bank boosted dollar liquidity through direct intervention and by holding a rare auction last month for $876 million.

Previously, the central bank sold bonds at higher yields to mop up naira liquidity and attract investor inflows. But it has also recently been conducting treasury bill auctions and open market operations at lower yields after inflation slowed in July.