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Monday, 11 February, 2002, 19:25 GMT
Devaluation fears hit Nigeria's currency
Shell oil platform in Nigeria
Weak oil prices put pressure on Nigeria's currency
The Nigerian naira fell on the official currency market, following a slide on the black market on Friday on fears that a devaluation is imminent.

The currency fell 0.6% to 114.7 against the US dollar after dropping 2.5% on the black market on Friday.

A spokesman for the central bank attributed the currency's plunge to calls from parliament for a massive devaluation to narrow the gap between official and black market rates.

With some parliamentarians saying the rate should be as low as 127 naira to the US dollar, demand for foreign currency has soared.

"At present there seems to be some level of uncertainty in the market and bankers are trying to hedge against eventual depreciation of the naira in accordance with the lower house suggestion by buying up the available foreign exchange in the market," said Tony Ede, a spokesman for the Nigerian central bank.

Oil woes

But although the government is trying to reduce the gap between the official and black market rates, analysts believe it could face severe problems keeping niara at the new, lower level.

Falling oil prices and production cuts leave Nigeria, the largest African oil producer, with rising demand for the foreign currency and falling supply.

Oil accounts for almost half of Nigeria's gross domestic product (GDP) and about 85% of all foreign exchange earnings.

Attempts by the current government to diversify the economy and make it less dependent on oil have so far failed, analysts said.

The slow pace of privatisation and market reforms have prompted the International Monetary Fund to delay loans.

Falling revenues from oil exports and a dwindling inflow of foreign investments have contributed to the pressures on the local currency.

See also:

16 Jan 02 | Business
Nigeria's economy dominated by oil
08 Jun 00 | Africa
Oil: Nigeria's blessing and curse
10 Jan 02 | Business
Nigeria invites in refinery-builders
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