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Naira extends worst week in 18 month

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The naira fell for a fourth day against the dollar on Friday, extending its worst weekly performance in 18 months, as foreign investors were said to repatriate funds from gains made in the nation’s capital markets.

According to Bloomberg, the currency tumbled 0.8 per cent to N162.60 a dollar in Lagos, the commercial capital, taking its weekly decline to 1.8 per cent, it’s worst performance since the five days through December 23, 2011.

Nigeria’s All Share Index on Thursday dropped the most in more than three years as emerging markets from Brazil to India took steps to stem an outflow of capital on concerns developed nations are close to ending an era of unprecedented liquidity.

Foreign investors accounted for 43 per cent of trades in March and 61 per cent in all of 2012, according to the Nigerian Stock Exchange.

Analyst at Lagos-based FSDH Merchant Bank Limited, Mr. Jide Solanke, said, “There’s a current high demand for dollars as people are taking profits and their money out. The reserve position is robust, which means the Central Bank of Nigeria can defend the naira. These are temporary fluctuations.”

According to the Central Bank of Nigeria, the foreign-exchange reserves have risen 9.8 per cent this year to $48.5bn as of June 12.

The Abuja-based regulator sold $600m at currency sales last week, 7.7 per cent less than the previous week. The CBN uses auctions on Mondays and Wednesdays to maintain exchange-rate stability.

The country sold fewer bonds last week than offered at its monthly auction as secondary market yields reached 10-month highs. The Debt Management Office sold N20.8bn ($129m) of the securities at its June 12 auction, below the N85bn originally offered.

Africa strategists at Rand Merchant Bank in Johannesburg, Celeste Fauconnier and Nema Ramkhelawan-Bhana, wrote in a report, “Certain market participants referring to it as a failed auction. Bouts of global risk aversion coupled with profit-taking have dampened the allure of local currency bonds, causing yields to tick up over the last two weeks.”

The yield on Nigeria’s 15.1 per cent notes due April 2017 rose to the highest since August 29 in the secondary market on June 11, a day before the auction. Borrowing costs fell 61 basis points to 13.72 per cent on Thursday, according to data compiled by Bloomberg.


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