Segun Aremu, a finance expert, has highlighted the reasons Nigeria’s naira continues to slide and losing its value.
The finance expert from the Peculiar Innovative Consulting, told our correspondent in an exclusive interview that, the Nigeria’s apex bank is managing the foreign exchange on one side, and leaving the factors of demand and supply to decide on the other side.
He tagged the CBN’s approach as “The Managed Float Regime of the Foreign Exchange Rate”.
Aremu said that until certain macroeconomics fundamentals are addressed, it may be impossible for naira to fully recover and stabilize in the forex market.
In his words:
“The Central Bank of Nigeria (CBN), at the moment currently practices a managed float regime’ of the foreign exchange. They are managing it on one side and also allowing it to float on the other side”.
“That is why we keep having the back and forth movement of the Naira against the dollars. But the question is, for how many years are we going to keep doing this?
“The challenge is that, like I have said on different occasions, this exchange rate regime been practice by the Central Bank of Nigeria will only give us temporary measure, and not sustainable at all.
On what can be done to address the situation, he said, “Until we become a producing nation, exporting our goods, and become an industrialized nation, we will keep demanding for the dollars.
“We can just manage it in terms of the supply, and demand, which is a management mechanism. The huge demand for forex for import goods, pay for services or import machines will always put demand on the Nigeria.
He suggested:
“What can be our solution now, is that our industries are given enough subsidy, our ability as a country to produce fuel on our own without incurring FX be enhanced in such a way that our petroleum refineries must be working, and working well.
“If they are not working well, we will still come back to this. If we want a sustainable foreign exchange market, Dangote, Port Harcourt and Warri refineries must be up and running. It is then that the demand for refined petroleum products and by extension foreign exchange will reduce drastically.
Available data revealed that exchange rate is now weakened by a significant 26.8% , since reaching its strongest point of N1,072$ in April, when it was declared the best performing currency by the apex bank.
The closing rate of N,466/$1 marks, the lowest level the Naira has touched since March 20th, when it was at N1,4921$1.
This confirms that all the gains recorded in April have been erased.
Earlier, Techeconomy reported that “Naira sinks into N1,515/$ at the Official Market,” relying on the data provided by the FMDQ.
“That is why we keep having the back and forth movement of the naira against the dollars. But the question is: For how many years are we going to keep doing this?
Recall that in 2023, the dollar scarcity cost the nine Lagos-listed fast-moving consumer goods companies (FMCGs) a combined N452.2 billion in net foreign exchange loss for the first half of the year, according to estimate using figures from their financial statements.
That, 37 times higher than the N11.9 billion recorded by the companies a year ago, tipped all but one of those firms into loss.
The humongous exchange loss, spurred by the manufacturers’ revaluation of their overseas loans and letters of credit after the naira weakened by 40 per cent in June, forcing some FMCGs to pass on the cost to consumers.
In the same year, Nigeria incurred a substantial loss of 65.7 million barrels of crude oil, valued at $83 per barrel, translating to a staggering revenue loss of N2.3 trillion because of oil theft.
“In 2022, it was reported that Nigeria suffered daily losses of approximately 437,000 barrels of crude oil, amounting to a value of $23 million, due to criminal activities.
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