BAD times are here again as the Nigerian economy is now showing grave signs of distress!
Occasioned by the wobbling and fumbling naira, battling with its worst exchange rate of N240 against the dollar, the stock market has also lost over N1 trillion as fleeing investors trade with caution. The prevailing forex crisis is traceable to multiple factors one of which is the Central Bank of Nigeria’s policies aimed at arresting foreign currency speculation and round tripping. The naira has also been devalued twice since late 2014.
Early this year, the apex bank closed the window that enabled forex dealers obtain currencies directly from it as relatively competitive rate. The CBN also opened a fixed official exchange rate for its own transaction, while allowing Bureau De Change Operators to run a parallel (black) market.
When the radical rules didn’t stop dollar speculation, the CBN, on Tuesday, June 23, 2015, excluded importers of some 40 products including sourcing forex from the bankers’ bank. The list of the 40 items include cement, margarine, palm kernel, vegetable oil, poultry products (chicken, eggs and turkey), Indian incense, tinned fish in sauce (Geisha, Sardines), cold rolled steel sheets, galvanized steel, roofing sheets, wheelbarrows, head pans, metal boxes, containers, and enamelwares.
Others are steel drums, steel pipes, wire mesh, steel nails, wire rods, security wires, wood particles and boards, wood fibre boards and panels, plywood board and panels, wooden doors, toothpicks, glass and glassware, kitchen utensils, tablewares, tiles and wooden fabrics, plastic and rubber products, soap and cosmetics.
The implication was higher demand for forex from the excluded importers and other end users, which it cannot meet.
“The supply of dollar and other foreign currencies have practically dried up. This CBN new policy is killing business and the economy. We bought the dollar at N239 and we are selling N240. Some are not even willing to sell, with speculators invading the market, it might hit the predicted N250 mark next week,” a forex dealer at Broad Street, Lagos. Mr. Okey Obiakwata told ENCOMIUM Weekly on Friday, July 10, 2015.
We learnt that the fortunes of the naira further dwindled last week with the Nigerian currency exchanging at over N240, N349 and N242 to USD, pounds and Euro respectively.
On Monday, July 13, the embattled naira however, traded at N235 and N355 to the US dollar and British pound, respectively. The falling naira has indeed affected its purchasing power, especially when one is buying imported products.
Even manufacturers who depend on some of the products or raw materials the CBN blacklisted have warned they might close shop when they exhaust what they have.
With the fear of hyper inflation looming, prices of products affected by the CBN new forex policy would also go up in a matter of days unless the market changes positively.
Economic and financial analysts have predicted that the naira might crash to 250 against the United States dollar at the parallel market in the next couple of weeks, following the trading of the currency against the USD at a record 232 last week.
STOCK MARKET LOSES N1.3 TRILLION
All the gains made in the euphoria of Nigeria’s largely peaceful 2015 general elections and President Buhari’s landmark win have been wiped out in just few weeks.
With the bears taking over the stock market, capitalization of equities has fallen by N1.3tn from the promising N12.135 tn recorded in April. Investors lost N273bn only last week, as the market dipped from N11.108tn, at which it opened on Monday, to close at N10.835.
“The decline in market value followed lingering equity sell-off by foreign and local investors, forcing stocks to fall at three month low last Tuesday,” financial experts explained.
Multiple sources also told ENCOMIUM Weekly that investors who were worried about shortage of dollars in the foreign exchange market and the falling naira, top the rank of those selling their shares. The air of uncertainty over the delay in forming President Buhari’s cabinet, largely unimpressive company performances, the falling global oil prices and the fragile domestic economic fundamentals have also taken a toll on the stock market and the Nigerian economy at large.
It is, however, hoped that President Buhari, from whom much is expected would, in a matter of weeks, take charge and reverse the worsening economy.
– UCHE OLEHI