Nigeria’s inflation rate rose to its highest level in four years at 17.33% in February, from 16.47% a month earlier, according to the National Bureau of Statistics. This had little impact on the Naira, which remained stable at 485 to the dollar on the parallel market, according to AZA, Africa’s largest non-bank currency broker by trading volume.
Since February 26, the official exchange rate has stood at 410, a 7.6% devaluation from 379 previously published on the Central Bank of Nigeria’s website. Any further devaluations leading to a convergence of the official and parallel market exchange rates could encourage the World Bank in its discussions with the Nigerian government. The Bank is withholding a $1.5bn loan until the government implements currency reforms in order to attract foreign investment. A liquidity crisis in the foreign exchange market was highlighted by a $1.86bn decline in external reserves over the past seven weeks to $34.66bn on March 10. The reduction is in spite the rising trend in the crude oil prices, with Nigeria’s Bonny Light jumping to $69.35 per barrel on March 11 from $46.67 per barrel on November 30. In the coming week, we expect the currency to remain stable on both the parallel market and the NAFEX window while we await any major news that could drive the currency in either direction.
