The naira yesterday hit a new all-time low of N365.25 to the dollar at the interbank foreign exchange market in a single interbank market trade of $1 million, before the naira finally stabilsed at N318.00 to the dollar. This is as the Debt Management Office raised N219.58 billion in local bonds with higher yields.
The local currency plunged to a record low and forwards rose, suggesting traders expect further depreciation, as the country struggled amid a dearth of dollars. The naira fell 5.9 per cent before paring losses to N330.63 to the greenback.
Three-month non-deliverable forward contracts soared 4.6 per cent to N366 versus the greenback, heading for a record close. Contracts maturing in a year climbed 2.7 percent to N400, also a record. A total of $13 million had been traded during the day.
Nigeria’s currency has slumped 37 per cent since the central bank ended a 16-month peg of N197-N199 per dollar on June 20. The capital controls needed to defend the fix sent foreign investors fleeing and took the West African country to the brink of recession.
Meanwhile the debt office said it sold N40 billion of 2021 paper at 15.08 percent at Wednesday’s auction, compared with 14.50 percent at the previous auction last month. It also sold N30 billion of 2026 debt at 15.28 percent, against 14.90 percent, and N40 billion of the 2036 debt at 15.53 percent against 14.98 percent.
The debt office sold N109.29 billion more than the initially advertised amount of N40 billion for the 2021 paper at the auction. Total subscription at the auction stood at N210.29 billion, lower than the N231.76 billion demanded at the last sale.
Nigeria is in the middle of its worst crisis in decades as a slump in oil revenues hammers public finances and the naira. Gross domestic product shrank in the first quarter and the central bank governor has said a recession is likely.
The West African nation has said it would borrow about N900 billion locally to finance part of the N2.2 trillion deficit in its 2016 budget, to plug shortfalls. Nigeria issues local bonds as part of measures to finance the government budget deficit and also help to manage liquidity in the banking system.