• Tuesday, February 27, 2024
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Naira sheds 0.27 per cent as oil price continues to fall

The naira slipped 0.27 percent on Monday amid a shortage of dollars on the interbank market, as higher demand coupled with declining global oil prices raised doubts about the central bank’s ability to support the local currency.

The naira closed at 163.85 to the dollar, below the three-month low of 163.45 naira it touched a week ago. The naira closed at 163.40 on Friday.

“Dollar demand from politicians holding their assets in hard currency ahead of elections next year has increased pressure on the local currency,” one dealer said.

The central bank was selling dollars directly on the interbank market to try to prop up the currency, which has shed almost 3.5 percent this year, for most of last week.

On Monday, the local unit of Royal Dutch Shell sold an undisclosed amount of dollars to some lenders, which was not enough to support the naira.

The naira has “depreciated substantially” on the interbank market in the past two months, Central Bank Governor Godwin Emefiele noted during last Friday’s interest-rate-setting meeting, citing risks from declines in global oil prices and domestic production.

Brent crude oil fell below $98 a barrel on Monday, dropping for the third session in four, as sluggish demand and ample supplies outweighed expectations of a cut in oil output from the Organization of the Petroleum Exporting Countries.

Dealers expect dollar sales by multinational oil companies as they meet their month-end domestic obligations to provide some support for the naira in the days ahead.