- The US dollar fell to a month-low on Monday after reports emerged that the economy has entered recession
- The US economy contracted very sharply following a strong dollar sell-offs which investors believed will slow hike in interest rates
- Experts in Nigeria dispelled the hopes that Nigeria's local currency will rebound following the fall the US greenback
The dollar plunged to a one-month low against major currencies on Monday, August 1, 2022, after it was announced that the US economy is in a recession which prompted investors to believe the Federal Reserve may not raise interest rates so soon.
The dollar index, which measures its performance against six other major currencies, including the Japanese yen, fell by 0.52 per cent to exchange at $105.35 which is its lowest since July 5, a Business Insider report says.
No hopes for the naira yet
The dollar endured sell-offs in recent times and only rose on two days since mid-July as reactions hit the markets over hopes that the Federal Reserve will become pushful in its monetary policy after it was revealed that the US GDP contracted for two quarters in a row, which is a technical definition of recession.
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Meanwhile, experts have predicted that the fall in the dollar and the contraction of the US economy won’t affect the fall of the naira, saying there are indices to show when a country’s currency is gaining strength.
Chukwuma Ude, an ex-banker and economist, said the naira won’t recover despite the fall of the dollar until Nigeria shores up its production and ramps up exports.
According to Ude, the naira is headed for a fatal crash and will hit N1000 by December this year.
“Nigeria is not yet a producing country and continues to rely on imports which are at about 60-80 per cent currently,
“Pending when Nigeria Nigeria begins to export, the naira will continue to plummet.”
Joy Justine said a forex broker said that Nigerians should not hope for a quick recovery of the naira as there are no visible economic plans in place by the Nigerian government to slow the fall.
“Currently, there are no economic policies by the Nigerian government which gives one a sense of direction and concrete plans on what they are doing.”
CBN promises naira will bounce back
This comes as the Central Bank of Nigeria said it is committed to stabilising the naira.
Nairametrics report says that the CBN disclosed this in response to Lawmakers’ summons about the falling Naira.
At the start of July 2022, the exchange at the parallel market was trading at N605/$. Compared to the current value of N720/$, the Naira has declined by a whopping 19% in one month.
Analysts predict what will happen to Nigeria if the Naira Continues its downfall
Legit.ng reported that Nigerians were alarmed on Wednesday, July 27, 2022, when news filtered in that the Nigerian currency has fallen to its lowest in history at N710 per dollar in the parallel market.
The news threw jitters down the spine of many who saw the fall as the crash of the economy under the watch of President Muhammadu Buhari and the Central Bank of Nigeria’s governor, Godwin Emefiele.
Experts have predicted that the Emefiele-led Central Bank is helpless and will actually drive the naira above N700 per dollar, as reported in this article by Legit. ng.