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LequteMan
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Nigeria - The US Federal Reserve for the first time in almost a decade has raised interest rates for federal funds by 0.25 percent to 0.5 percent, up from zero to 0.25 percent.
The rate increase is reportedly stirring fears of another wave of turmoil in emerging markets that have already been hit by financial squalls, rising debt levels and anemic demand- this includes Nigeria and most African countries.
According to experts, a rise in U.S. interest rates is a litmus test for many emerging economies and shows how prepared they are to withstand the potential capital outflows triggered by higher U.S. yields and a stronger dollar.
The Nigerian Naira of recent has been on the decline following policies of the CBN aimed at protecting the currency and curbing negative speculations about it.
The naira on Wednesday fell to a record all time low, exchanging at N265 to a dollar at the parallel market.
The currency's value at the interbank market remains fixed at N198 naira per dollar but the widening gap between the parallel and interbank market is a cause for worry.
The increased US rates is expected to lead to a stronger dollar, spelling doom for the naira.
A stronger dollar, coupled with the scarcity of the greenback due to the clampdown on Bureaux de Change in the country, is expected to further weaken the naira in the next few days.
The currency might exchange at N275 or N280/dollar on the parallel market before the end of the week, mounting further pressure on the CBN and Nigerian authorities to devalue the naira once more.
The rate increase is reportedly stirring fears of another wave of turmoil in emerging markets that have already been hit by financial squalls, rising debt levels and anemic demand- this includes Nigeria and most African countries.
According to experts, a rise in U.S. interest rates is a litmus test for many emerging economies and shows how prepared they are to withstand the potential capital outflows triggered by higher U.S. yields and a stronger dollar.
The Nigerian Naira of recent has been on the decline following policies of the CBN aimed at protecting the currency and curbing negative speculations about it.
The naira on Wednesday fell to a record all time low, exchanging at N265 to a dollar at the parallel market.
The currency's value at the interbank market remains fixed at N198 naira per dollar but the widening gap between the parallel and interbank market is a cause for worry.
The increased US rates is expected to lead to a stronger dollar, spelling doom for the naira.
A stronger dollar, coupled with the scarcity of the greenback due to the clampdown on Bureaux de Change in the country, is expected to further weaken the naira in the next few days.
The currency might exchange at N275 or N280/dollar on the parallel market before the end of the week, mounting further pressure on the CBN and Nigerian authorities to devalue the naira once more.
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