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Naira is falling to nearly N500 to $1

January 14, 2017 by Admin Leave a Comment

Macroeconomic dislocation and the distressed pressure brought to bear on naira is triggering the precipitously freefall of the value of the Nigeria’s currency. This is now beyond the pale, a disastrous saturation point and if it continues unchecked the naira as we know it will become a worthless currency just like the Zimbabwe currency.

Since the official devaluation of naira coupled with negative growth of the economy, things are falling apart and the center cannot hold any more in this West African nation.

“The Naira on Friday depreciated further at the parallel market as dollar scarcity worsened. The Nigerian currency exchanged at N497 to a dollar at the parallel market, losing two points from Thursdays posting; while the Pound Sterling and the Euro traded at N597 and 515 respectively. At the BDC window, the Naira was sold at N399 to a dollar, while the Pound Sterling and the Euro closed at N600 and N515, respectively” as reported by NAN.

The parallel market is probably the effective indicator to rationalize the true value of naira to a dollar. The unrestricted parallel market does not have government controlled forces to regulate the trading of dollar as the Central Bank of Nigeria (CBN). The parallel market is purely regulated by the market forces of demand and supply unlike CBN dollar market that are rationed to commercial banks with some restricted regulations..

“Trading at the interbank market window saw the Naira closed at N305.00 to a dollar. Alhaji Aminu Gwadabe, President, Association of Bureau De Change Operators of Nigeria (ABCON), expressed the hope that the Naira would bounce back next week. Gwadabe said that the CBN would be selling about 25 million dollars to BDCs next week and this would definitely help in reducing liquidity challenge in the Market. He urged Nigerians not to panic as the CBN was working closely with the BDCs to ensure that the Naira recovers quickly.” (NAN)

Another major headache in Nigeria is the rising inflationary index since the devaluation of naira and the thinning country’s foreign reserve. It was reported that the annual inflation rate purges from 18.48 in November to 18.55 percent in December of 2016. And we are not anticipating anything better for the first quarter of 2017. There is no glimpse of silvery trends wherever you look at economy.

The depressing value of naira is being made worse by the falling of the oil price and incoherence in the economic planning of the government. The recession of the economy with negative GDP growth can be turn around not by waiting for oil price to rebound. But rather by fabricating a detailed bulwark to combat rising inflation and stabilize the economy especially the weaken currency . The falling naira and biting inflationary trends can be redirected as a fulcrum for triggering economic growth by coming up with a logical strategy to grow and sustain a pro-growth economy.

Filed Under: Strategic Research & Analysis Tagged With: CBN

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