The naira slumped to a record low and stocks retreated the most in the world before Nigeria’s central bank meeting to review interest rates in Africa’s biggest oil producer.
The currency fell 1.2 percent to 176 per dollar by 4:11 p.m. in Lagos, the commercial capital, a fourth day of declines. The Nigerian Stock Exchange All Share Index (NGSEINDX) lost 2.1 percent to 33,428.76 in the worst performance among 93 primary indexes tracked by Bloomberg.
The Nigerian selloff came as investors weighed potential outcomes of an Organization of Petroleum Exporting Countries meeting next week, with Morgan Stanley saying a production cut looks increasingly likely. Nigeria is an OPEC member and crude oil exports account for about 70 percent of government revenue.
Foreign reserves dropped 2 percent this month as the Central Bank of Nigeria sold dollars to lenders to stem the naira’s slide. The regulator may increase its key rate from 12 percent next week to support the currency, according to ETM Analytics.
“Expectations are rising that the bank will throw in the towel and hike policy rates given the seeming futility of trying to keep the naira from depreciating,” Gareth Brickman, a Johannesburg-based Africaanalyst at ETM, said in a note to clients.
Macro Picture
The bank will give its decision on Nov. 25. Policy makers have left the benchmark rate unchanged since October 2011. Inflation slowed to 8.1 percent in October from 8.3 percent the previous month.
“I don’t think anything they can do at this point would significantly affect the naira,” Seun Olanipekun, an analyst in Lagos at Investment One Financial Services Ltd., said by phone. “Everything hinges onoil prices.”
The NSE all-share gauge dropped 5.5 percent this week, the worst African performer among global indexes tracked by Bloomberg. That almost erases last week’s 6.5 percent gain.
“People have been taking profits based on their gains last week,” Ayodeji Ebo, head of research at Afrinvest West Africa Ltd. in Lagos, said by phone. “What’s responsible is the weak macro picture.”
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