Global fall in oil prices affects Nigerian naira

The Central Bank of Nigeria announced new measures to curb currency speculation as part of an effort to improve the standing of the naira. (Flickr)

Nigeria’s central bank on Friday announced new measures to curb currency speculation as part of an effort to defend the naira, which has been hit hard by the collapse in global oil prices.

Customers who purchase foreign currency through the interbank market or an authorised trader must use the funds within 48 hours, said a statement issued by the Central Bank of Nigeria (CBN).

“Failing [this], such funds must be returned to the CBN for re-purchase at the Bank’s buying rate,” it said, warning that sanctions would be imposed on those who fail to comply.

The measure targets speculators who seek profit by buying up foreign currency in hopes that the naira will continue to fall.

Nigeria, Africa’s largest oil producer, depends on crude exports for 70% of government revenue and some 90% of its foreign exchange earnings.

The government has said that plummeting crude prices have put huge strain on revenue and have announced a series of measures to respond to the crisis.

Last month, the CBN devalued the naira by 8%, conceding that defending the currency had put unsustainable strain on dwindling government revenue.

The CBN had devalued its currency in late November to a new target rate of 168 naira to the dollar. But the currency’s street value was much weaker than that, with a dollar fetching more than 180 nairas.

Further cuts
President Goodluck Jonathan warned on Tuesday that Nigeria could be forced to cut further the amount of oil revenue it uses for government spending if the global crude price continued to plummet.

Abuja sets a so-called benchmark oil price, which has been slashed to $65 from $78 earlier this year. Revenue from oil exports up to that price go into general government spending.

United States benchmark West Texas Intermediate (WTI) for January delivery was trading at $54.84 on Friday, while deals for Brent crude for February were done at $59.59. – AFP