The Central Bank of Nigeria has vowed to fight off speculators taking bets that the naira will be devalued after Kazakhstan became the latest country to abandon control of its currency.
After imposing trading restrictions in February to prevent dollars from fleeing Africa’s largest economy, importers have been unable to pay suppliers, a thriving black market has sprung up in foreign banknotes and a collapse in government oil revenue amid sliding crude prices has left teachers unpaid.
Kazakhstan’s decision to drop its peg for the tenge, which led to a 23 percent drop against the dollar, intensifies pressure on countries to let their currencies weaken on concern the yuan’s devaluation last week will make exports less competitive. The move followed Vietnam’s third devaluation of the dong on Wednesday, while Russia stopped managing the ruble in November. Reconsidering fixed exchange rates is becoming more urgent also as the Federal Reserve moves closer to raising interest rates for the first time since 2006, which has throttled demand for riskier assets.
The naira’s exchange rate needs to strike a balance between Nigeria’s dependence on oil for export earnings, with the country needing to import most of its goods. The currency, which has remained below 200 per dollar since mid-May, weakened 0.7 percent to 199.05 by 12:29 p.m. in Lagos. Six-month naira forwards jumped 2.6% to 235, the highest since July 27.