By Chijioke Ohuocha
ABUJA, March 11 (Reuters) - Nigerian stocks extended losses for a fourth session on Wednesday, sinking to a more than four-year low, while spreads on bond yields widened as jittery investors fret over the value of the naira currency after oil prices plunged.
The currency eased on the forward market, with the two-month contract pricing the naira above 400 to the dollar. The naira was priced much weaker at 468 in one year's time, compared with the official rate of 306.95 supported by the central bank.
On the spot market, the naira was quoted at 368 on thin liquidity. Nigeria operates a multiple exchange rate regime which it has used to manage pressure on the currency.
The impact of the oil price plunge has spread across asset classes in Nigeria, causing investors to widen spreads on the bond market, sell-off stocks and weaken the naira currency.
"I think the central bank will try to hold on to the currency as long as they can until the inevitable, which is a devaluation," one trader said.
Charles Robertson, global chief economist at Renaissance Capital, said the oil price plunge makes Nigeria's debt-to-revenue ratio look worse, which doesn't help the country's credit profile -- another reason for a currency depreciation.
"I don't think they are going to rush to move the currency. It is possible that Russia and Saudi do a deal in weeks and the oil price can rebound and then Nigeria can hold off from a shift in 2020," Robertson added.
Nigeria's central bank governor Godwin Emefiele, who supports a strong currency, backed by President Muhammadu Buhari, has been burning through the country's dollar reserve to prop up the naira.
Ratings agency Fitch said on Tuesday that Nigeria's B+ rating, which has a negative outlook, could face problems if a prolonged attempt to defend the country's currency peg ate heavily into its international reserves.
Abuja's reserves were $36.18 billion as of March 9, down 16% from a year earlier.
On the bond market, the 2021 bond quoted at 12.79% on the bid was offered for sale at 6.57%. Traders said local investors were showing some buying interest but spreads are widening.
The stock index on Wednesday retreated to 23,540 points, a level last seen in January 2016.
Banking shares were the biggest fallers, down 3.54% and taking the sub-index to its lowest level in 40 months.
"As a start, Nigeria should use the current oil crash to finally move beyond its oil subsidies and the vague exchange rate policy," said Zin Bekkali, chief executive of Silk Invest.
Bekkali said Nigerian policy makers should step in to allow local pension funds greater allocation to equities, which would help restore confidence to portfolio flows and support the naira.
(Reporting by Chijioke Ohuocha, additional reporting by Karin Strohecker in London; Editing by Catherine Evans)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.