Monday, 14 September 2020

NAIRA AND INFLATION IN FOCUS

Lukman Otunuga,
Senior Research Analyst at FXTM

Once upon a time, the Naira was worth almost twice as much as the Dollar and equivalent to the British Pound.

Fellow #Nigerians, are you aware that our #crude #oil will soon become useless? Yes, it will, in no distant time, become #valueless owing to the fact that the #countries that rely on it as their only source of #energy are developing more affordable #alternative sources of energy. When this finally happens, what will we do? How are we currently preparing for this imminent #economic doom? Which other sector will continue to stabilize our economy? Nigerians, the only #solution is developing the #agricultural sector. In fact, this is the only #solution. Very soon, the major source of revenue will become agriculture and #agro-exports. How are you positioning yourself to play big in agro-export #business? Why don’t you get a practical manual that explains the stages of export trade from #processing and #packaging of #commodities to receipt of #payment by the #foreign buyers? Yes, arm yourself with the #contemporary #trends in #export #trade. This manual explains export #operations, export #management, export #documentations and methods of #payment in export trade? Yes, it is a contemporary step-by-step guide to export trade. It tells all the contemporary dynamics in export trade. To get it, click on this link: http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html   

Fast-forward today, the local currency is trading at a paltry N455 per Dollar, N585 per Pound on the parallel markets and around N380 on the official exchange.  The Naira’s story has been one filled with many twists and turns revolving around Oil prices, multiple exchanges, unfavourable economic fundamentals, Dollar scarcity, pegged exchange and overall uncertainty. Will the Naira ever be able to return back to its former glory? Given how Nigeria is still nursing wounds inflicted by COVID-19 and falling Oil prices are threatening the country’s economic outlook, the vulnerable Naira remains in the direct firing line.

For Nigeria to become truly productive and break away from the chains of Oil reliance, could a free-floating Naira be the solution? While an artificially strong currency remains attractive for Nigeria based on the fact that most products are imported, the negative impacts continue to be reflected across the economy. Given how over 90% of foreign exchange earnings are sourced from Oil sales, falling oil directly impacts Nigeria’s FX reserve which complicates the CBN’s effort to defend the Naira. This dependence and heavy exposure to external risks leave Nigeria open to currency instability and uncertainty.

Do you know that the kind of #vehicle you drive goes a very long way in affecting your #image? Yes, your vehicle tells people, including your #prospective #clients, how #comfortable you are. #Comfort is directly proportional to #competence. Of course, if you are competent in what you do, you will be comfortable enough to afford at least a #brand #new vehicle. Have you ever wondered why #banks and other #financial #institutions give their #marketers brand new cars? Your level of comfort goes a long way in determining if your prospective clients will trust you. The reason why you have not won those contracts or deals could be because your prospective customers think that you are incompetent owing to how worn-out your car is. Yes, the onus is on you to acquire brand new cars. Top sales people buy new cars every year. Do you know what? That worn-out vehicle that you currently drive can look like a brand new one. We, at GOF AUTOS LIMITED can make it possible via total #body #work, #refurbishing, #priming, #painting with the best #paint in the #world called #SIKKENS #PAINT, #OVEN #BAKING with a world-class oven and #BUFFERING. #Blue-chip #companies, #CEOs and top #managers give us all their worn-out vehicles for body work. You, too, can enjoy our world-class services. For details about GOF Autos Limited, click: http://www.tectono-business.com/2017/06/gof-autos-limited-best-automobile.html

The question is whether Nigeria will be able to handle the aftermath from a free-floating Naira. If the natural forces of supply and demand are allowed the determine the equilibrium value of the Naira, a sharp depreciation could be on the cards based on the macroeconomic conditions. Such may accelerate inflationary pressures, forcing the CBN to potentially hike interest rates while other central banks are cutting. All in all, the idea of a free-floating Nigeria could elevate Nigeria’s economic prospects and offer transparency. However, this will depend on whether the country had the ability to bounce back from the potential pain inflicted by a tumbling Naira.

Investors will direct their attention towers the pending inflation figures for August which are forecast to jump 12.95%, its highest level 12 months. Inflationary pressures are expected to rise over the next few months thanks to continued border closes and coronavirus induced supply disruptions.

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