- The Central Bank of Nigeria Governor, Godwin Emefiele is incapable of saving the naira before he leaves office next year, analysts say
- According to experts, the naira will hit N700 per dollar before December as Emefiele-led CBN grapples with the worst fall of the naira in history
- Analysts say that the fiscal policy of the government is to blame for the unabating fall of the naira as investors are scared to bring in foreign exchange
Last week, the dollar hit the same parity as the euro, the first in 20 years and experts say this has sent other currencies tumbling in the international markets.
The strong showing of the dollar, experts predict, will set off an economic tsunami for weaker economies around the world whose currencies would further be eroded.
Though, good for the US economy, the predictions are not really good for other countries, especially economies with strong economic ties to the US.
Strong dollar, weak naira battering Nigeria's economy
According to reports, the deliberate downward adjustment of a country’s currency value is a monetary policy tool to obtain competitive trade advantages. The idea is simple: if your currency is worth less, your products are cheaper, and it is much easier to put them on the market, which revitalizes exports and boosts the economy.
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But economic analysts predict doom for countries like Nigeria with a weak currency, the naira.
The local currency has been on a downward spiral for the past seven years since the current Nigerian president, Muhhamdu Buhari took over the reins of power and appointed Godwin Emefiele as Nigeria’s Central Bank Governor, whom many say is clueless about saving the naira.
Emefiele has exhausted his first tenure in office as Governor of the Central Bank of Nigeria, Africa’s largest economy, and is way into his last tenure.
In 2015, before he took over the saddle as the CBN helmsman, the local currency exchanged for less than N200 per dollar and as at the time of writing, it is going for N600 per dollar and there are predictions that the naira will not recover for the remaining tenure of Buhari as President and Emefiele as the CBN governor.
Analysts blame CBN for lack of direction
Financial analyst and journalist, Kelechi Mgboji predicted that the naira will hit over N700 per dollar before December and said that if Emefiele could not save the naira in the last seven years, it is unlikely that he will do so in the next 6 months before Buhari exits Aso Rock.
“How can Emefiele save the naira? He has been on the job and one tenure has run through and his second tenure is almost up. How can he save the naira now? Nobody is capable of saving the naira until Nigeria does the proper thing."
Mgboji stated that there is little the CBN can do to save the naira, saying it requires a lot to save the naira which he said are both monetary and fiscal policies and that the CBN can only manage monetary policies but is helpless over the fiscal policy.
According to him, the CBN cannot turn Nigeria to a producing economy. He also faulted the fiscal policies of government. He said investors are not confident about the fiscal direction of the Nigerian government.
“The reason the naira is crashing is because investors are not bringing the naira and that they are running away.”
He also cited trust deficit as part of the reason investors are scared stiff about about Nigeria.
“As long as investors lack trust and cannot rely on government in anything, they will always stay away, irrespective of what you ask them.”
But John Onyeji, an economist and financial analyst, said that the inability of Nigeria to halt major imports and start manufacturing critical products is what is hurting the naira the most, rather than the CBN whose role is just monetary rather than fiscal.
“It is not the duty of the CBN to provide fidcal direction for the economy. Theirs is just monetary policy and don’t forget, the CBN is under the ministry of finance and cannot do more than was told.
“For over six months in 2015 the CBN handled both the fiscal and monetary policies of the government and that’s where this whole challenges started from.”
Praises and solutions
Mgboji praised the federal government in handling the Ease of Doing Business but said there are still some hitches like clearance in the ports which has remained daunting over the years.
“But these are not the key problems with investors. Investors’ major grouse is that the can’t trust the government and they not comfortable with the security situation in Nigeria. These are the two major problems.”
Naira Records biggest Fall to US Dollar at Official Market History, Despite Nigeria’s Rising Foreign Reserves
Naira records biggest fall to US dollar at official market history, despite Nigeria’s rising foreign reserves
Legit.ng reported that Nigerian currency has dropped to its biggest low to the US dollar in the last seven months at the official market, and it could get worst in the coming months.
FMDQ securities data shows that at the official market, Naira on Tuesday closed at N430 which is a N4.25 or 0.99 percent devaluation from N425.75 posted in the previous market session on Monday.
The last time Naira exchange at N430 or above was Thursday, 30th December 2021 at the official market.