The Naira dropped to a historic low against the US dollar on Thursday with economists warning the Nigerian Naira is falling with no end in sight, while some saying it could reach as low as N500 to a dollar.
Starting the day at 274, the Nigeria Naira hit 280 in the afternoon against the US Dollar with the Euro and Pound Sterling nearing 400 Naira, after a rate rise by government’s failed bid to support the currency, according to Solomon Amadi, a Lagos based economist.
Per Second News also gathered that stock market indexes also dropped, following weaker oil prices.
The Naira has lost more than 40 per cent since the beginning of the year, weakened by a slide in oil prices and general risk aversion to Nigeria’s assets, fueled by the decline in the economy and the lack of economic policy.
The price of oil, which together with sales of natural gas account for more than half of Nigeria’s budget revenues, reached a new five-and-a-half-year low due to persistent concerns over a global supply glut and a bearish demand outlook.
Most Businesses have been struggling to access dollars as the CBN rations the supply to BDC’s across the country in what some economists say is the cause of the current problem.
Speaking to Per Second News in Washington James Harding said part of the reasons is falling commodity prices, declining mining investment, reduced government spending and the economy struggling to transition from being led by the oil industry to more services-driven growth.
Mr Harding is not alone in his view, with Bank of America senior economist Sheila Cummings also expecting the Naira to fall further towards the end of the year.
“Historically, such periods introduce much change and volatility in exchange rates, whereby currencies tend to overshoot. As such, we may revisit currency levels we have not seen for many years,” Mrs Cummings said.
Some other analysts say another possible cause of the Naira astronomical decline is as a result of emerging market currencies being under pressure this month.
Argentina’s peso plunged more than 26.5 percent on Thursday as a new government floated the currency as part of a slew of free-market reforms.
A falling currency is not completely bad news however.
“An important historical precedent is during the Asian crisis of the ’90s, the falling by a lot helped cushion the economy and saved several countries from following all of major Asian trading partners into recession.”
Meanwhile, the plans by the CBN to chase out black market operators come January 2016 is seen by some doomsters that consequently the economy will implode and the globe will spin off its axis into outer darkness.
An official of the CBN has disclosed that the bank would soon give a directive on the new policy that is expected to frustrate the booming black market trading of foreign currencies nationwide.
According to an economist speaking under the condition of anonymity an economic and social breakdown will follow this plan as the black market has been a source from where most SME’s are getting forex to sustain their business.
According to his line of prediction, we should all be rearing chickens in anticipation and ready to grow bean shoots in our closets for food.