Nigeria's naira at 1-month low after central bank flags lower interest rate

Naira exchanging for dollar

The Nigerian naira eased to a one-month low of 163.85 on Thursday, shedding 0.69 percent against the U.S. dollar after new central bank governor Godwin Emefiele said he wanted to gradually lower interest rates.
The unit closed at 162.72 naira to the dollar on Wednesday. The naira was last seen at this level on May 8, when it traded at 163.90 against the U.S. currency.
Dollar demand was boosted by investors repatriating dividends abroad, while a lack of fresh supply of hard currency from oil firms coupled with the central bank's new stance on interest rates weighed on the naira, dealers said.
"If interest rates are going to fall ... that could lead to a panic sell-off, with negative implications for the naira," one currency dealer said.
New governor Emefiele said on Thursday he would pursue a gradual reduction in interest rates, an apparent reversal of his predecessor's policy which was credited with bringing inflation down to single digits.
"There is no doubt that reducing interest rates and maintaining exchange rates are very daunting twin goals," Emefiele told his first news conference.
"However the central bank will work assiduously to ... ensure that these goals are mutually achieved," he added.
His comments triggered a fall in bond yields and treasury bills as well as in the naira.
Analysts said there was a strong link between naira stability and high interest rates and that Emefiele did not outline what steps he would take to achieve lower interest rate in the run-up to elections next year.