Following the recent crises that have befallen Nigeria’s currency, the Naira, a foreign exchange expert has advised the country to float its currency just like Egypt did.
Although crude prices are a little above $50 per barrel nearly six months after OPEC’s oil cut in order to boost prices, still, prices are well below peaks above $100 last seen in 2014.
Many OPEC nations, Nigeria inclusive, are being deprived of oil revenues needed to grow their economies.
As a result, the Naira crashed recently to above N500 to $1 at the exchange market, shooting up cost of living, importation, manufacturing inclusive.
In a bid to salvage the situation, the Federal Government through the Central Bank of Nigeria, pumped dollars into the economy-Nigeria now sells for N310.25 to $1 as at Monday.
In the face of crude’s failure to rebound meaningfully, Bank of America-Merrill Lynch declared this week that crude is facing a “moment of truth,” and forecasted international and U.S. crude prices will be capped near $70 this year. Separately, the International Energy Agency expects lower oil demand, even as OPEC and non-OPEC countries recently churned out nearly 97 million barrels per day.
“At some point, they will have to float the currency like Egypt did. President Buhari appears to be ill (how bad is anyone’s guess), so there may be some policy paralysis,” Win Thin, global head of foreign exchange for emerging markets at Brown Brothers Harriman said on Monday.
Calling the current situation “unsustainable,” Thin said that “foreign investors are staying away because it’s so hard to repatriate funds out. I don’t think the current exchange rate is salvageable — they should float it and let it find its true level,” he said.
As the Naira continues to appreciate against the dollar and other foreign currencies amid liquidity boost, indications emerge that CBN is unrelenting in its move to ensure more liquidity in the interbank FOREX market, as it will further inject more foreign exchange into market.
Even though the Bureau de Change and parallel market segments have also benefitted from the recent interventions, the next action of the apex bank is sending jitters to currency speculators who hitherto took advantage of the scarcity of foreign exchange in the recent past. Confirming the proposed additional foreign exchange injection into the system, the Acting Director, Corporate Communications of the CBN, Mr. Isaac Okorafor said that bank was determined to sustain the provision of liquidity in the foreign exchange market in order to enhance accessibility and affordability for genuine end users.
Okorafor also cautioned dealers in foreign exchange not to engage in any unwholesome practice that is detrimental to smooth operations in the market, warning that the CBN would impose heavy sanctions on any organization or official involved in such act.
Earlier this month, the CBN had intervened in the interbank FOREX market by offering over $1.2 billion for both wholesale and retail interventions. The CBN had offered the sum of 100 million dollars as wholesale interventions and sold about 70 million to meet requests for business and personal travel allowances. The move was in a bid to sustain the tempo of foreign exchange supply to the interbank market and ensure liquidity. It was also to enable more people to overcome the difficulty of obtaining forex for their transactions.

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