The continuous dollar scarcity and shrinking forex liquidity in Nigeria’s currency market as lately led the naira to depreciate against the dollar to sell at N446 a deferential of one naira from its previous close of N445 to $1
The ever-increasing dollar outflow from Nigeria in recent months has negatively affected its foreign reserve plummeting to $34.66 billion according to the latest data obtained from Nigeria’s Central bank website
Lately, at the forward market, the naira recently depreciated exchanging at an all-time high against the dollar, with the 5 years non-deliverable forwards falling to N570/$1 from N413/$1Nigeria’s central bank maintains it has enough dollars to meet demand as it commenced the sale of forex last week.
However, Thelma Ugonna Ohiri-Anyanwu, CFA a leading financial expert in Nigeria’s tier 1 bank explained the need for monetary policy stakeholders to readjust the value of the naira. She said
“My recommendation would be to officially devalue the naira which I believe is long overdue, this would make importation more expensive and encourage exportation of goods by local manufacturers which in the long run will increase the dollar inflows, thereby leading to the strengthening of the Naira.
“She buttressed on advising Nigeria’s Central Bank in increasing import tariffs rather than an outright ban on selected import items, she continued by saying
“Nigeria’s central bank needs to remove the current ban on forex allocations for the importation of goods and rather implement trade policies that would increase tariffs on luxurious imported goods and give subsidies to local manufacturers who export their products.
(READ MORE: Naira depreciates at the parallel market, closes at N437 to $1)
This would encourage local producers to be more creative, improve their products, and export these products, leading to an increase of improved domestically produced products, thereby, diversifying the economy and reduce the country’s reliance on the China economy.
I would also recommend the reduction of the monetary policy rate to help stimulate the real economy and stall stagflation.
Just recently in a recent report released by Bloomberg, the Manufacturers Association of Nigeria (MAN) said that its members were finding it very difficult to access U.S dollars for their business transactions.
Meanwhile, just last month, Nigeria’s central bank resumed the provision of foreign-dominated currencies to commercial banks based in the country
Nigeria’s central said the resumption of the exercise was for onward sales to small and medium enterprises (SMEs) wishing to undertake the importation of essentials needed to help revamp the economy devastated by the deadly COVID-19 pandemic.