The naira reached the lowest level in more than a month as investors slowed purchases of Nigerian bonds after oil prices weakened and output missed a forecast.

The currency depreciated 0.3 per cent to N159.35 per dollar in Lagos, the lowest on an intra-day basis since March 18.

The naira has retreated two per cent this year and is set for a third weekly decline, according to data compiled by Bloomberg.

Nigeria depends on oil shipments for 80 per cent of government revenue and 95 per cent of its export income. Bonny Light, one of its main grades, has slipped from this year’s peak of $120.54 per barrel reached on February 8 to $105.51 on Friday.

Production fell below projections in the first quarter due to theft and pipeline sabotage, state-owned Nigerian National Petroleum Corporation said last week.

Output ranged from 2.1 million barrels a day to 2.3 million barrels, below an estimated 2.48 million barrels.

An analyst at First Securities Discount House Limited, Mr. Jide Solanke, said, “There’s been less than estimated production and the oil price has seriously fallen in the international market. It’s a concern.”

Nigeria’s one-year Treasury-bill yields rose to a five- month high and bids dropped to the lowest this year in a Central Bank of Nigeria auction on April 24.

Borrowing costs on the 16.39 per cent domestic bonds due January 2022 soared 50 basis points to 11.86 per cent, according to yesterday’s data compiled by Bloomberg.

As oil output missed targets, growth in Nigeria’s foreign reserves eased to 0.4 per cent this month to $48.8bn, compared with a 2.5 per cent gain in March.

Solanke said, “A lot of foreign portfolio managers are going to be looking at that figure. On the strength of that figure a lot of people are coming to Nigeria.”

The CBN has enough reserves to defend the naira and “keep it where we want,” Governor Lamido Sanusi had said in an interview in Lagos.

The CBN sold $518.77m to lenders at two regular auctions on April 22 and April 24, an increase from $498.67m the previous week. The regulator also sold $86m directly to the market on April 23..

The CBN uses the auctions to stabilise the naira as the cost of importing refined fuel, which accounts for 70 per cent of the local gasoline market, boosts dollar demand and puts pressure on the currency.

Source: Punch