Naira to Dollar
By Akeem Atoyebi
Many analysts have spoken on why Nigerian currency is one of the worst given its abysmal performance in international market.
According to these analysts,more disruption and distortion are to be expected which will further depreciate its value.
Naira doubled its downward slide Thursday hitting N1,710/$ in the parallel market, as against N1,690/$ the previous day.
The Naira also faced a similar fate in the official market, depreciating to N1,660/$ from N1,659/$ the previous day.
A World Bank report earlier in the week said that Naira is among the worst-performing currencies in the world so far in 2024.
Commenting on the situation, David Adonri, Analyst and Executive Chairman at Highcap Securities Limited, said: “The Naira has been battered severely by its persistent depreciation since last year following its floating.
“However, there is still a lot of distortion surrounding its value because CBN is still indirectly influencing it’s price thereby thwarting the market mechanism that ought to efficiently allocate the currency”.
Giving reasons for the woes of the local currency, Adonri stated further: “The precarious situation of the economy, huge fiscal deficit and excessive public borrowing together with dwindling forex income have battered the Naira”.
Making a recommendation for better performance, he said, “To strengthen the Naira, the government must run austerity on its recurrent expenditures, balance its budget and mobilize the domestic factors of production to drastically cut down on imports.
“There is actually a correlation between the value of the Naira and the inflation rate. Galloping inflation has been eroding the value of the Naira.
“If the government takes the supply side of the economy seriously, inflation will be tackled”.
Also wading in, Tunde Abidoye, Head, of Equity Research, FBNQest Securities, said that efforts to strengthen the Naira must start with increased crude oil production.
While agreeing with the assessment of the Naira by the World Bank as the worst-performing currency globally, Abidoye highlighted measures that are needed to strengthen the Naira noting that the Cardoso-led Central Bank of Nigeria, CBN, has done a lot to enhance the workings of the forex market and ensure transparency.
He stated: “From my perspective, the things that need to be done are: In the near term – drive increased crude oil production. Oil production has to be taken up to maybe 1.8mbpd to 2mbpd;
“Medium-term – increase exports of the non-oil products, and possibly try to start to develop the export of services”.
Also stressing the need for increased oil production, Nnamdi Nwizu, Co-Founder, of Comercio Partners, said: “We all know that the “Naira has struggled over the past year, with a 51% depreciation from $/N810 to $/N1,650. During that period, we have seen the CBN aggressively tighten the market liquidity, increasing Cash Reserve Ratio, CRR, to 50% and Monetary Policy Rate, MPR, to 27.25%, from 32.5% and 18.75% respectively.
“I, however, believe that there is a limit to monetary policy and that we have reached it. The way forward in my view is working on the Fiscal policy. We need to increase our sources of foreign currency.
“Low-hanging fruit would be to increase crude oil production and sell some assets. Longer term would be to restructure the economy to become an export-driven economy, by increasing production output in the manufacturing sector.”
