THE fortunes of the naira has tremendously improved in the past few days as the local currency has regained some grounds against the US dollar, British pound, Euro and other benchmark foreign currencies.
From its alarming Black Market value of N172 to US dollar towards the end of January 2014, to its current exchange rate of N169, the naira has also marginally appreciated against the pound at the rate of N271 from its previous N272 market value. Even at the official market, the naira has also been relatively stable as the Central Bank of Nigeria (CBN) pegged it at N155.75 (dollars), N253.561 (pounds) and N210.5584 (euros) official Export Exchange Rate (EER).
Financial experts said the positive development could be attributed to the efforts of the CBN to defend the naira through multi-faceted strategies. It has been the resolve of the CBN governor, Lamido Sanusi Lamido to protect the naira with everything at his disposal.
Positive economic indications, like the rebound of the manufacturing sector, government policy on importation have also helped the naira greatly.
The CBN, for instance, invests billions of naira in buying up foreign currencies which it supplies to the market through the Dutch Auction System (DAS). Early in the year, the apex bank spent all of $1.4 billion in just one week to protect the ailing naira. It also came up with a fresh exchange control template weeks back to further strengthen the local currency. In an apparent move to bridge the increasing gap in the value of naira at the Retail Dutch Auction System (RDAS), the Bureau de Change (BDC) and the parallel market, the CBN announced the removal of the limit of the amount of forex sales to BDCs. Before this move, BDCs were subjected to a limit of $250 million weekly. CBN, in a circular dated January 24, 2014, addressed to all authorised dealers and BDS, explained that the policy was aimed at shoring up liquidity in the BDC sector of the foreign exchange market. And the effort has now paid off with the naira appreciating against major foreign currencies.
The fate of the wobbling naira had raised serious concern to policy makers and managers of the Nigerian economy. Once at par with the US dollar and almost exchanging neck-to-neck to the British pound in the 70s, naira has since lost its value.
But financial experts are optimistic that the naira would rise again in the years ahead, especially now that Nigeria has joined the exclusive league of promising economies classified as the MINT countries.
MINT, a broad classification of the economies of Mexico, Indonesia, Nigeria and Turkey is a term originally coined by Fidelity, a Boston, USA-based asset management firm, and was popularized by Jim O’Neill of Goldman Sachs, who had created the term, BRIC (Brazil, Russia, India and China) economies.
O’Neill, in a column for Bloomberg View, said the MINT countries have very favourable demographics for at least the next 20 years and their economic prospects interestingly promising.
Nigeria is a middle-income, mixed economy and emerging market, with expanding financial service, communications and entertainment sectors. It is ranked 30th (40th in 2005, 52nd in 2000) in the world in terms of Gross Domestic Product (GDP) at purchasing power parity as of 2012 and the third largest within Africa (behind South Africa and Egypt) on track to potentially becoming one of the 20 largest economies in the world by 2020.”
Interestingly, the only African country in the MINT group, more recent reports have indicated that Nigeria has now overtaken South Africa as Africa’s largest economy with a GPD of $405 billion in December, 2013. And much of these positive economic outlooks can only be sustained by a strong currency that guarantees better life for the masses.
– UCHE OLEHI