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LequteMan
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According to Financial Derivatives Company, Nigeria is on the verge of a currency crisis following recent volatility in the value of the Naira.
The naira appreciated by 3.15% against the U.S. dollar last week to close at N215/$ at the parallel market and in a matter of hours it depreciated to N225/$.
Currency volatility is not peculiar to Nigeria. For example China, the 2nd largest global economy, recently unsettled the financial markets by devaluing its currency and moving to a managed float. The country had maintained a tight grip on the Yuan, allowing it to float on either side of the 2% reference rate. Such a development raises concerns for other global manufacturers, as China is a major trading partner of most countries.
Nigeria is on the verge of a currency crisis and the solution lies in increasing inflows and decreasing outflows from the reserve account.
The weakening of the naira is partly as a result of internal imbalances arising from import dependence, an uncompetitive manufacturing industry and over-reliance on oil for foreign earnings. Taken together, if these issues are eliminated simultaneously by removing the fuel subsidy, encouraging the manufacturing sector and adopting a free floating exchange rate, the naira will be on track to recovery and trading at a fair value.
Click here to read full article from Proshare
The naira appreciated by 3.15% against the U.S. dollar last week to close at N215/$ at the parallel market and in a matter of hours it depreciated to N225/$.
Currency volatility is not peculiar to Nigeria. For example China, the 2nd largest global economy, recently unsettled the financial markets by devaluing its currency and moving to a managed float. The country had maintained a tight grip on the Yuan, allowing it to float on either side of the 2% reference rate. Such a development raises concerns for other global manufacturers, as China is a major trading partner of most countries.
Nigeria is on the verge of a currency crisis and the solution lies in increasing inflows and decreasing outflows from the reserve account.
The weakening of the naira is partly as a result of internal imbalances arising from import dependence, an uncompetitive manufacturing industry and over-reliance on oil for foreign earnings. Taken together, if these issues are eliminated simultaneously by removing the fuel subsidy, encouraging the manufacturing sector and adopting a free floating exchange rate, the naira will be on track to recovery and trading at a fair value.
Click here to read full article from Proshare
