Nigeria’s central bank lowered the target band for the naira on Tuesday, and it raised interest rates by 100 basis points to 13 percent, as it sought to stem losses to its foreign reserves from defending the local currency.
The central bank moved the band to 160-176 naira to the U.S. dollar, compared with 150-160 naira previously, owing to prolonged naira weakness and high dollar demand.
The naira has taken a beating over the past few months, as falling oil prices have shaken confidence in the assets of Africa’s leading energy producer, reports Reuters.
Defending the move, the bank’s Governor Godwin Emefiele said efforts to defend naira had led to “dwindling foreign reserves” and that a “more flexible exchange rate is the most viable option”.
In a further tightening move, the bank hiked the cash reserve ratio for private sector bank deposits to 20 percent, from 15 percent previously