Following OPEC’s refusal to cut oil output, a measure that would have helped stem falling global oil prices, Nigeria’s naira resumed its fall against the dollar, a day after it showed glimpses of stabilizing.
Saudi Arabia blocked calls on Thursday from some members of OPEC, including Nigeria, to cut output; this led to an oil price plunge, and as markets reacted negatively to a decision, the naira fell 1.7 percent in early Friday trade to 177.25 against the dollar.
Nigeria’s currency touched a record low against the dollar on Wednesday, a day after the central bank devalued it by 8 percent in a bid to halt a slide in its already depleted foreign reserves. And the glimpses of positivity brought on by a slight rise on Thursday, faded by Friday morning. Falling world oil prices and a retreat from emerging markets have put pressure on the currencies of several oil exporters, including Angola, whose kwanza is also in retreat.Brent crude fell more than $6 to $71.25 a barrel after OPEC ministers meeting in Vienna left the group’s output ceiling unchanged despite huge global oversupply, marking a shift away from its long-standing policy of defending prices. The falling oil price has created expectations of further declines which would put further strain on the central bank’s currency reserves, weighing on the naira. “Many importers are bringing forward their obligations in view of the persistent fall in oil prices,” Reuters quotes a dealer as saying. “A number of them … anticipate a further depreciation of the naira, so they are stock piling the dollar.”
Unlike the Gulf countries, who have large foreign currency reserves, Nigeria’s oil savings fell during the boom times, partly owing to theft of its oil by criminal gangs hurting output and partly because too much money was distributed to state governors.
