Dollar Naira Forwards Hit 3-month High on Budget Worries

Nigerian non-deliverable forwards rose across the curve by over 2 percent on Tuesday, after the country's government said it expected its budget deficit to double to around 2.2 trillion naira ($11 billion) next year.

Non-deliverable currency forwards, a derivative product used to hedge against future exchange rate moves, indicated markets expected the naira's exchange rate to be at 262.00 to the dollar in 12 months' time. It was the weakest rate against the dollar in three months and compared to 256.75 at Monday's close.

"The currency has been under enormous pressure," said Jan Dehn at emerging market fund manager Ashmore. He said Nigeria's plans to spend to make up for losses to the economy from falling oil prices wasn't sustainable.

"Since (President Muhammdu) Buhari has come in he has done everything wrong and nothing right... It (the non deliverable forward rate) is going to go wider from here, so it doesn't bode well for Nigeria."

Three-month dollar-naira NDFs also rose by just over 2 percent to hit 224.75 to the dollar.