Nigeria Steps Up to Try to Halt Currency’s Slide

The naira is plunging in response to falling oil prices and despite Central Bank action.

Nigeria’s central bank intervened to support its currency after a record-breaking slide, traders said.

IUt would be recalled that the apex bank stepped in Friday to buy the currency after the U.S. dollar shot up to more than 172 naira, traders said, marking an all-time low for the Nigerian currency. The move lower is being driven by concerns that tumbling oil prices would hit Africa’s biggest economy hard. Nigeria is Africa’s top oil producer.

Late Friday in New York, the naira recovered to 166.180 against the dollar, compared with 170.215 naira late Thursday. The central bank didn’t respond to requests for comment.

Analysts are warning of a self-reinforcing slide in the currency ahead.

The bank also limited the amount of money lenders can deposit in the bank’s Standing Deposit Facility to 7.5 billion naira, or about $45 million. That regulation should boost the amount of naira between banks, traders said.

But Nigeria’s foreign-currency reserves recently stood at $39.5 billion, much smaller than Russia’s $454 billion as of the end of September, limiting Nigeria’s ability to hold back the decline.

Other corners of Nigerian markets also felt the heat. Nigeria’s All-Share Index dropped 3.7% to its lowest point in nearly 18 months, and all three of Nigeria’s outstanding dollar-denominated bonds traded marginally lower, according to Tradeweb.

The plunge in oil prices could put pressure on Nigeria’s budget just as President Goodluck Jonathan and state officials are expected to ramp up spending ahead of national elections set for February.