Nigeria Intervenes With Dollars as Naira Slides on JPMorgan

Indications have emerged of what lies ahead in the coming year as Nigeria’s central bank sold dollars to stem the naira’s drop to a record low after JPMorgan Chase & Co. said the debt of Africa’s biggest economy may be cut from its local-currency emerging-market indexes.
Nigeria was placed on Index Watch Negative for JPMorgan’s GBI-EM indexes after central bank measures announced in December reduced foreign exchange and bond trading, making it difficult for foreign investors to replicate the gauge, the New-York based lender said in an e-mailed statement Friday. The Abuja-based regulator intervened after the announcement, according to Guaranty Trust Bank Plc.
“You’ve got a bunch of global investors who are benchmarked to the GBI and Nigeria is 1.8 percent of the index,” Kevin Daly, who has cut his holdings in naira debt to zero among the $13 billion in assets he manages at Aberdeen Asset Management Plc in London, said by phone. “I doubt some of those investors would want to own it if it’s not in the index.”
With Nigeria dependent on crude exports for 70 percent of government revenue, the more than 50 percent drop in prices since last year’s peak in June sparked investor outflows that policy makers have tried to stem by devaluing the naira and raising interest rates to a record 13 percent. The currency weakened 11 percent over the past three months, the most among 24 African currencies tracked by Bloomberg.
The naira depreciated to an all-time low of 188.48 against the dollar Friday. It pared losses after the regulator’s move to trade 0.4 percent stronger at 185.05 as of 7:35 p.m. in Lagos. The currency is poised to end the week 3.5 percent down, the most since Nov. 14.