New Telegraph

Report: Rising CBN yields may signal naira devaluation

A rise in cost of Nigeria’s short-term debt and a weaker naira rate to sell dollars to investors in a month’s time signal that the country’s central bank may devalue the currency for the third time in less than a year, Bloomberg said in a report yesterday.

The CBN almost doubled the returns on its higher yielding paper, moving the one-year maturity to 10% at an auction on Thursday, up from 5.7% a week ago, according to the apex bank’s data. Earlier this week, it sold one-month non-deliverable naira forwards contracts for N412 per dollar on the FMDQ OTC Securities Exchange from N405, an indication that it expects the currency to weaken.

“These developments are signaling that the central bank may allow rates at the investors’ and exporters’ window to rise further, possibly to levels close to onemonth futures prices. “This rise in OMO bill yields, along with the upward re-pricing in futures, will increase market expectations of moderate naira devaluation in the near term,” Bloomberg quoted Samir Gadio, the London-based head of Africa strategy at Standard Chartered Bank, as saying.

Nigeria has been reluctant to allow an adjustment of its currency after the oil price crash early last year cut foreign- exchange inflows from official sources.

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