Naira nosedives as anxiety grips investors over falling crude price

Reflecting increased apprehension among foreign investors over the impact of falling crude oil prices on the nation’s external reserves and the value of the naira, prices of stocks at the Nigerian Stock Exchange yesterday declined further thus over taking Zimbabwe as Africa’s worst performing market this year.

1000-naira-notes Meanwhile, the naira yesterday depreciated by 135 kobo at the interbank foreign exchange, as the interbank foreign exchange rate rose to N167.35 per dollar from N166 per dollar on Tuesday. Cumulatively, the naira has depreciated by 170 kobo this week at the interbank market. The depreciation of the naira was occasioned by increased demand for foreign exchange courtesy of foreign investors divesting from the nation stock market and bond market. At the stock market, the Nigerian Stock Exchange, NSE All Share Index had dropped for a 10th day market trading, leading to a loss of 13 percent in 2014. Specifically, the NSE Index slid 2.1 percent to 35,958.38, the lowest since September 2013, as 50 stocks retreated, seven rose and 138 were unchanged. The gauge is the world’s fifth-worst performer this year after benchmarks in countries including Russia, Portugal, Greece and Austria. The naira weakened 0.8 percent to 167.25 per dollar. Banks were among the main losers. FCMB Group Plc declined 9.5 percent, the most in more than two years. Union Bank Nigeria Plc, in which Bob Diamond’s Atlas Mara Co-Nvest Ltd. (ATMA) has a stake of about 30 percent, fell 9.2 percent to its lowest level since September 2012. Banks suffered because of tighter central bank regulations, which have forced some to raise capital, and investors’ concerns about their exposure to oil companies, Seun Olanipekun, an analyst at Investment One Financial Services Ltd., had said. “The central bank’s measures have restricted the revenue streams of banks,” said Olanipekun. “And the loan exposure to the oil and gas sector is pretty high for most of the banks.” Zimbabwe’s benchmark gauge is down 11.7 percent. External reserve falls by $38.3bn Meanwhile, the nation’s external reserve continued to fall, declining by $339 million in the first three days of this month. From $38.763 billion on October 29th, the external reserve had fallen to $38.324 billion on November 3rd. Cumulatively, the external reserve fell by $757 million in October, representing the biggest decline since it started rising in June. By extension, the external reserve has declined by $5.51 billion or 11.8 percent in 2014. The persistent decline in the external reserve is occasioned by increased foreign exchange sales by the Central Bank of Nigeria (CBN) in order to defend the naira. Last month, the apex bank sold $3 billion through the bi-weekly RDAS sessions. As a result the apex bank had sold $29.1 billion in 2014. OPEC basket price falls to 4 Years low Meanwhile crude the decline in crude oil price persisted yesterday, with OPEC members’ average crude price falling below $80 for the first time in four years as Saudi Arabia and other members of the group supplying 40 percent of the world’s oil maintained output amid slowing demand growth. The OPEC basket, the best measure of what the oil exporters earn per barrel, fell to $78.67 yesterday, the group said by e-mail today. That’s the lowest since October 22, 2010, according to data compiled by Bloomberg. U.S. oil production rose to the highest in at least 31 years amid slowing global demand, helping drive crude into a bear market last month. The largest producers in the Organization of Petroleum Exporting Countries reduced prices rather than cut output, with Saudi Arabia, Iraq and Iran offering the biggest discounts to buyers in Asia this month since at least 2009. The group will meet in Vienna on Nov. 27 to discuss whether to cut output to support prices. “Saudi Arabia seems to have other aims than protecting the price,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by e-mail. “The Saudis’ attitude might only change if the other members agree to contribute to a cut, the likelihood of which is slim at best.” Brent futures, the world’s most actively traded crude contract, fell as much as 1.4 percent to $81.63 a barrel in London today. The December contract traded at $82.14 a barrel at 11:28 a.m. You might also like...