From Ejike Chinedu, Lagos
The Naira closed the week at an all time low of N205 to a United States Dollar. Since its 42 year existence, the Naira has never been this weak.
The current rate had exceeded projections presented last year when the Central Bank of Nigeria began the process of devaluation by pegging the dollar to N185. It was anticipated that gradual decline in the strength of the Nigerian currency will push the exchange rate to N200 to a dollar by December 2015. But now, before the end of February, the Naira had blown off the yearly projection to N205 to a dollar.
Governor of the Central Bank of Nigeria, Godwin Emefiele within the week announced that the apex bank is spending $110m daily to uphold the naira.
Between January 30th and February 10, 11 days to be precise, Nigeria’s foreign reserve has lost over $ 1 billion to its present $33.4 billion due to the defending of an already devalued Naira. So far, over $6bn have been spent in interventions even as the Naira continues in the downward slide.
As at today, Price of crude oil stood at $61.48 per barrel, slowly rising from a scary low price of $45 per barrel. If the CBN and other managers of the country’s economy point to the negative turnaround in the global oil market for the declining fortune of the naira, why should the positive adjustment in the market not rob off on the naira.
Though the CBN governor had assured the banking sector that the dwindling naira will not affect the banks, he attempted to boost the confidence of foreign investors in the country. In addition to managing the economy, the CBN governor and other principal officers of the government with economic responsibilities are faced with the challenge of remaining politically correct.
Bigger concerns are that the realities on ground negate almost all the ratings coming from global financial organisations. Government policies are normally dependent on such ratings from the World Bank, International Monetary Fund and the rest. Simple implication is that financial policies are likely to be disconnected from the economics of every day Nigeria.
With a daily evaporation of the country’s foreign reserve into the thin air of intervention, there are fears that only an immediate devaluation can spare the country from the threatening doom of total collapse.
