The naira is at risk of being devalued
after President Goodluck Jonathan suspended the Central Bank Governor,
Mr. Lamido Sanusi, last week, eroding confidence in monetary policy and
sending the naira to a record low.
Bloomberg reported that the naira,
which rose for the first time in six days on Monday, posted its biggest
five-day drop in eight months last week.
The yield on Nigeria’s July 2023 dollar
bond had its steepest one-day jump on record after Sanusi’s removal on
February 20. The security has lost 2.3 per cent this year, compared with
a 0.6 per cent drop in the JPMorgan Chase & Co. index of African
sovereign debt.
While the acting governor pledged
continuity in policy on February 21, saying there were no plans to
devalue the currency, the central bank will have to fight to keep the
naira within its targeted range of three per cent above or below 155 at
twice-weekly foreign-exchange auctions.
The peg may be shifted to 170 per dollar, boosting inflationary pressures, according to Yvonne Mhango at Renaissance Capital.
“The market seems to be anticipating a
devaluation,” Mhango, a sub-Saharan Africa economist at RenCap, said in a
February 21 phone interview from Johannesburg. “Given the loss of
confidence and sentiment turning against Nigeria, I think they’re going
to struggle to keep the naira at present levels.”
The suspension of Sanusi, 52, followed
the governor’s calls for an investigation in December into billions of
dollars in missing oil revenue.
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