Devaluation of Naira

Nigerian Naira touched record low yesterday against US dollar on the back of central bank devaluing it by eight percent, before the presidential elections early next year. Central bank raised its benchmark interest rate for the first time in three years and devalued the naira as tumbling oil prices sent the currency to an all-time low. The nairas official peg was moved to a midpoint of 168 per dollar, from 155, and its trading band widened to 5 percent either side from previous 3 percent.Central bank of Nigeria devaluing the currency is aimed to boost the local industries by keeping their import price high. The naira is being overwhelmed by a drop in prices for oil, the biggest foreign-exchange earner, with the currency weakened to a record low of 178 per dollar on Tuesday. While the central bank has stepped in to defend the currency, selling dollars outside its twice-weekly auctions, the interventions have reduced foreign reserves to a five-month low of $37.2 billion. Nigeria cannot influence the oil prices but combination of measures can preserve the macro economic stability. Nigerias government is planning to cut spending by 6 percent next year in response to lower oil prices, along with the finance minister to defend the currency.