The naira fell to record lows on both the official and unofficial markets on Monday, while stocks posted their biggest one-day fall in more than a year, as jittery investors sold off local assets, a clear sign that Nigeria economy is tanking.

The currency dropped to 1,712 naira per dollar in late trades on the official market and to around the same level on the unofficial market after extending losses.

Africa’s largest economy has been experiencing crippling dollar shortages that have pushed its currency to record lows, though central bank Governor Olayemi Cardoso has said that foreign exchange liquidity is improving.

The latest fall on the currency and stock markets comes after data showed on Thursday that the country’s inflation rate had accelerated further in January, reaching almost 30% in annual terms, driven by soaring food costs.

“Without policy moves in sight to rein in inflation, the naira will continue to devalue simply on a purchasing power basis. There are also risks that it could further deter foreign investors, given the increasingly negative real yield found in Nigerian debt securities,” said Kyle Chapman, FX markets analyst at London-based Ballinger & Co.

Stocks on Nigeria’s All-Share Index fell 3.15% on Monday after banking, consumer goods and industrial shares dropped, to post their single biggest fall since Oct. 2022.

Heavyweight Dangote Cement (DANGCEM.LG), opens new tab and MTN (MTNN.LG), opens new tab each fell the maximum 10% allowed on the bourse, to help drag the index (.NGSEINDEX), opens new tab to 102,395.21 points.

Stocks had been acting as a hedge against inflation for investors.

Cardoso has hiked open market rates to draw investors to bills which had lost their shine to equities as inflation climbed, but treasury rates still lag the benchmark policy rate and the fall in the naira means yields would have to rise further.

Reuters