2019!!! Great Tension!!! Nigeria’s Naira Sinks Further, To Exchange Above N400 Per Dollar – Shocking Implications As Economic Experts Speak Out

By Joshua Amaugo April 6, 2018 16:35

2019!!! Great Tension!!! Nigeria’s Naira Sinks Further, To Exchange Above N400 Per Dollar – Shocking Implications As Economic Experts Speak Out

News reaching Post-Nigeria, indicates that the naira, yesterday, depreciated by 30 kobo to N360.45 per dollar, in the Investors and Exporters, I&E, window, even as the window recorded 236 percent upsurge in its turnover.

According to data obtained from the Financial Market Dealers Quote, FMDQ, the indicative exchange rate for the I&E window rose to N360.45 per dollar, yesterday, from N360.15 per dollar, on Wednesday, translating to a 30 kobo loss in the value of the naira.

The depreciation according to news reports, came in spite of the 236 percent increase in the volume of dollars traded in the I&E window, yesterday.

The window recorded a turnover of $572.1 million, an upsurge from $170.21 million, on Wednesday.

Recall, that as at February, this year, data from the Financial Market Dealers Quote, FMDQ, showed that the indicative exchange rate for the window rose to N360.37 per dollar, from N360.22 per dollar, translating to a 15 kobo depreciation.

The 15 kobo depreciation of the naira, was in spite of the 12 percent increase in the volume of dollars traded in the I&E window. The window recorded a turnover of $169.16 million, from $151.55 million.

Going forward to March, the naira marginally fell by 0.04 percent, finishing at N360.47 per dollar, against N360.32 per dollar, which it traded in the previous session.

This depreciation occurred as the Central Bank of Nigeria, CBN, injected another $210 million into the interbank segment of the foreign exchange market.

Already in April and the naira plummeting further, the implication is that this devaluation will eventually curtail foreign investments in Nigeria. It will truly give any investor a pause before investing in Nigeria, because it appears that at the current rate of volatility of the Naira, there is no investment in Nigeria that will produce a good return on investment.

A renowned Economist, Henry Boyo, had in one of his articles, said that Nigeria has learned nothing from what happened to the Ghanaian and Zimbabwean currencies.

“I see the naira being devalued by 20 percent as time progresses. I have repeatedly said that mopping up the naira to achieve exchange rate stability is wrong. The CBN substitution of the naira allocations for the dollar should be stopped. Allocations should be divided based on dollar certificates. The exchange rate for the naira will continue to fall.”

Boyo said the prices of goods and services will gradually go up, as importers add the increase to the cost of goods and services. He equally sees the price of fuel going up, despite declining oil price.

Meanwhile, the Chief Executive Officer of Financial Derivatives Limited, Mr. Bismarck Rewane, had while reacting to the downward trend, said:

“What you are seeing today is symptoms of mis-allotment of the currency, because of the structure of the market and the process which the foreign exchange market is operating.”

On the possibility of a drastic fall of the naira as experienced in 2015/2016, he said: “You can see that the rate of depreciation of the currency (naira) has actually slowed; so I do not think it can depreciate to that level (N700/dollar). If there is a catastrophe, yes it is possible. But is that likely? It is very unlikely to happen.

“But more than anything else, the current state of the forex market in Nigeria must be reformed and completely overhauled. If you do not do that, no matter what happens, you are not going to get the results you want”, Rewane noted.

Presently, Financial Analysts are speculating that the Nigerian naira is expected to trade closer to N400 per one dollar, as election campaigns for 2019 enter into full swing.

Already some Presidential candidates are gesturing, and Financial Analysts say that could result in a negative trend in 2018.

Electioneering is expected to push up government spending in 2018, and the risk of the budget deficit being monetized will increase, which would be negative for the naira, according to the Lagos arm of the Russian Investment Bank, Renaissance Capital.

The foreign exchange market Analysts concluded by saying the naira was currently undervalued.

 

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