Kalu Aja, a Certified Financial Education Instructor has attributed the continued fall in the value of the Naira against the dollar to three major factors.
It’s no longer news that in the ending week, naira crossed the 900 to 1$ ceiling causing the fear that Nigeria’s currency might exchange for 1000 to 1$ before December, 2023.
Kalu, the CEO of Financial Planning in a tweet via his verified Twitter handle, attributed the fall to over dependency on importation.
His tweet reads:
Compare the past to the present
PAST
1. CBN $1: N468; no $
2. Black Mkt $1: 700, $ available
3. send $1 get N468 @ bank
PRESENT
4. Bank $1: N800; no $ availability
5. Black Mkt: $1:N910, $ available
6. Send $1 get N800 at bank
Issue in past was availability and negative arbitrage. Negative arbitrage is now gone as there is no CBN rate, we still have $ availability or supply issue.
Why?
A. Imports have not reduced. Nigeria still importing PMS, still paying foreign loans in $, still schooling abroad, still buying imported SUVs
B. Exports have not increased. Crude Oil is still being bunkered. Logistics infrastructure still out dated
C. Confidence, many Nigerians believe the naira will keep losing value, this they are now saving in $ not Naira. This the USD has become legal tender not just for transactions but for settlement and investment in Nigeria
Although the balance of trade is positive, meaning exports are more than imports, Nigeria needs to attract significantly higher Foreign Direct Investment and Portfolio inflows to cause the Naira to appreciate
There is work to do
