The Central Bank of Nigeria (CBN) has devalued the naira from N155 to N168  to a dollar, as it battles to preserve macroeconomic stability. It has also increased its benchmark interest rate to a record high of 13 percent from 12 percent.

Sliding oil prices has for months made speculations of a devaluation rife. But the CBN had maintained it would not devalue the naira, and had periodically intervened using the country’s foreign reserves, which has now depleted to $36.5 billion. It has fallen $12.5 billion since the post-global crisis peak of $49 billion in April 2013.

With oil prices continuing to fall – OPEC daily basket stood at $74.28 per barrel on Thursday – a continued defence of the naira with the foreign exchange reserves will be disastrous for the economy, as the pressure on the currency continues. Nigeria’s apex bank therefore responded with a devaluation, to stem the pressure against the naira. It also increased the interest rate as a way of guarding against domestic inflation, which comes with currency devaluation.

Although CBN Governor Godwin Emefiele admitted that inflationary pressures were moderating, he noted that election-related spending could cause a spike in inflation. He said bold policy measures were required, as fall in oil prices could be permanent. Oil is Nigeria’s major foreign exchange earner.

Analysts say the move by the CBN governor was a bold policy response.