The Naira, been the official currency of the most populous black nation of the world (Nigeria), has been through a series of fluctuating trend in the last few years. This year’s plunge of the naira can best be termed as the most unprecedented fall our dear currency has ever seen.
Nigeria was Africa’s largest economy and top oil producer, but her public finance keeps shrinking and suffering in
recent times, this is traceable to the fall in global oil pump price, owing to the fact that crude oil serves as the major revenue source of the country where over seventy percent (70%) of her revenue is derived.
The economic quagmire been faced in the country as a result of this global oil price slash became even more worsened by the recent vandalisation of oil infrastructure and destruction of pipelines by a group of rebels who have not shown any sign of laying down arms, effect of which has caused a further plunge in the country’s oil production from a previous 2.2 million barrel per day (bpd), to a low output of 1.4 million barrel per day this year.
For sixteen months the central bank has fixed the naira at 197 to 199 per dollar, this was an attempt to prevent a rapid plunge of naira to the dollar. But Nigeria being more of an import dependent country made moves to further halt the importation of many goods in order to protect and preserve her foreign reserves. This effort unfortunately, proved abortive than effective as it resulted in further depletion of her foreign reserves. The situation became uncontrollable and in June this year, the country hit a double-digit inflation thereby hiking up prices of goods. This made Nigeria to abandon the sixteen month 197 to 199 naira to dollar peg (haven being hit by this unfortunate reality)
OUR PRESENT PREDICAMENT?
The removal of the peg, has still not improved the economic situation of the country because of the forex scarcity, which has also left a number of foreign investors and multinational companies to pack up leaving the country. Indigenous companies, businesses and organizations are not left out as most of them have adopted massive retrenchment strategy in order to cut down running cost. The saddest part is that it has further increased unemployment in the country.
The unavailability of forex and the hike in general price level has constrained most businesses from accessing raw materials needed for production. It therefore suffices to say that the business environment and the economy of Nigeria at large is currently in a recession – a position we cannot immediately help our self from.
Officially now, the naira is 305 to dollar in the interbank market, while still been traded as high as 460 in the parallel market (where most businesses get their cash to bring in raw material and supplies). With this trend in place, it is very obvious that the immediate redemption option to salvage the situation is an influx and injection of forex into the official market by the central bank. This measure will help boost back and resuscitate our choking currency value.
PRESENT INTERVENTION; FUTURE EXPECTATIONS.
The CBN has relaxed her forex holding policy, as it is now injecting dollar on a daily bases to boost liquidity and support the naira.
The CBN approved eleven (11) new international money transfer operators to address the dollar supply.
The dollar supply level has also increased as a result of the ban-lifting from eight suspended banks who were banned from the interbank currency market for failing to remit money owed to the government.
CBN has also been mopping up naira liquidity to shore up debt yields.
More injections and increase in forex will encourage a better and flexible exchange rate; this will subsequently stimulate more supply of forex, thereby making more dollar available. These sequence of measures put in place will finally aid the naira to bounce back with value.