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Sir: The Central Bank of Nigeria (CBN) was left under pressure as optimism faded over the effectiveness of the Naira policy which has been implemented to stabilize the Nigerian economy. Although the Naira de-peg was only enforced last week, there are still fears that foreigners may not invest amid low oil prices, and Brexit woes, which continue to erode global confidence.
Market participants are expecting the Naira to devalue further which could trigger an influx of international cash investments into Africa’s largest economy. The Naira has depreciated almost 30% since June 20th as Nigerian policy makers tackle fears over a potential recession and persistently depressed oil prices. Although the Naira is free floating, concerns still linger that the CBN is heavily managing the currency and this may have discourage investors.
Recently, Nigeria signed an $80 billion oil and gas infrastructure agreement with Chinese companies, which marked the first step to reducing dependency on fuel imports. It should be kept in mind that the nation’s four refineries have never hit full production level amid poor maintenance and weak infrastructure consequently causing Nigeria to import expensive fuel for its energy needs. The future may be bright but there is plenty of work yet undone.
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• Lukman Otunuga is a Research Analyst at the FXTM
