FOLLOWING persistent exchange rate pressure on the Naira, a herd of finance and economic experts have highlighted why there is no respite in sight, listing conditions for a stronger local currency.
The Naira on Friday further depreciated against the greenback by 0.21 per cent to N412.88/US$ at the Investors and Exporters, foreign exchange (FX) window as demand appears to have outweighed supply.
Also, the Naira/US$ exchange rate rose (Naira depreciated) at the Bureau De Change and Parallel markets by 4.09 per cent and 4.59 per cent to close at N560.00/US$ and N570.00/ US$ respectively.
Unfortunately, Nigeria’s dollar supply has been in decline. According to data from the Central Bank of Nigeria, the total inflow of dollars into Nigeria’s economy in 2020 was $116 billion.This is 20 per cent lower than the $142 billion in 2019.
A 30 per cent drop from the $160 billion inflow back in 2014 Analysts believe that the dollar decline has been driven by a 34 per cent drop in oil inflows, a 27 per cent drop in non-oil inflows, and a 62 per cent drop in capital importation ( FDI) or foreign investment in stocks and bonds, between 2019 and 2020.
According to them,one of the major reasons for this free fall is lack of trust in government as well as mindless borrowing with misplaced priorities and increased arbitrage arising from Fintechs and crypto.
Kingsley Moghalu, a former deputy governor of the CBN says Nigeria’s currency crisis will only get worse if the country fails to diversify but continues to rely on its crude oil driven mono-product economy, In a statement posted on his official Facebook page over the weekend, Mr Moghalu said what Nigeria needs to do is to let the Naira find its level in the market, adding that the most important determinant of the value of the Naira is whether or not the Nigerian economy is productive and competitive in international trade.
The former presidential aspirant explained that diversification of the economy is not by trading cashew or yam tubers but by adopting value- added commodities that are products of serious engineering and innovations.
Mr Moghalu’s remarks come amidst an unprecedented fall in value of the Naira, especially at the black market after the ban of forex sales to Bureaux De change operators by the CBN.
His words: “When the price of oil drops, and as the world innovates toward alternative energy sources, the amount of external reserves we have to back up the international value of our legal tender (our reserves) frequently comes under pressure. It is those reserves, our main defense in a soccer analogy, that determines the value of the Naira.”