The Naira depreciated to its weakest in three months against the dollar after the country’s inflation accelerated.
The naira declined 0.5 per cent to N158.78 per dollar in Lagos, headed for its weakest since February 14, according to data compiled by Bloomberg.
Inflation accelerated to 12.9 percent in April, the fastest since October 2010, from 12.1 per cent in March, the National Bureau of Statistics said yesterday. The Central Bank of Nigeria, which raised its policy rate to a record 12 per cent in October, forecast inflation would peak at 14.5 per cent in the third quarter before gradually slowing to below 10 per cent by the end of 2013.
“The inflation rate will put the naira under pressure of depreciation,” Bismarck Rewane, the Chief Executive Officer of the Lagos-based Financial Derivatives Co., said by phone.
today. “The central bank may want to fight inflation by holding the rate at the current level as increasing it further will be counter-productive.”
“We expect inflation to peak at about 13.5 percent in July, owing largely to the secondary effects of the partial removal of fuel subsidies earlier this year,” Absa Capital strategists, led by Ridle Markus in Johannesburg, wrote in a report today.
Yields on Nigeria’s Eurobonds due 2021 declined by four basis points to 5.430 percent in London.
Borrowing costs on domestic bonds due 2015 gained four basis points to 15.03 percent as of May 14 data on the Financial Markets Dealers Association website.