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The naira weakened on Tuesday against the dollar in the non-deliverable forwards market as expectations of a devaluation grew before a key budget speech by the finance minister.
Emerging equities held steady near 19-month highs, while currencies such as the rouble and the Turkish lira were also more or less unchanged against the firmer dollar . Earlier in the day, the Philippine peso plumbed a 10-year low.
The spotlight was on Africa, with most attention focused on the naira after Nigeria’s central bank effectively devalued the currency for private individuals while holding the official exchange rate at 305 per dollar.
People can now access hard currency at a rate of 366 per dollar to pay for foreign school fees and travel, though the black market rate is around 520.
Three-month naira-dollar NDFs weakened almost 6 percent while one-month NDFs traded 4 percent lower – their weakest levels since November, according to Reuters data . The naira also slipped 6 percent in the six-month NDF market, showing a rate of 395 per dollar.
Nigeria has tried to make the exchange rate more flexible before, leading to a 30 percent devaluation last year, only to reimpose a quasi-currency peg.
“The story of a possible devaluation has come back as the latest moves seem to show a small entry towards to a weaker exchange rate,” said William Jackson at Capital Economics.
“My worry is that they are not moving to a fully floating rate but to a more complex system of parallel rates, which will add to the confusion but won’t help exporters.”
Nigerian five-year credit default swaps traded at a one-year high of 618 basis points, according to Markit.
