Nigeria’s currency on Friday weakened marginally by 0.03 percent to N386.13k per dollar from N386.00k traded the previous day at the Investors and Exporters (I&E) forex window.
Naira/dollar exchange rate is quoted daily on the FMDQ exchange. At the I&E forex window, the foreign exchange market opened with the dollar trading at the rate of N386.00k on Friday as against the opening rate of N385.72k on Thursday.
On Friday the dollar traded unchanged against the local currency at N415.50k and N361 at the black market and official window, respectively.
Nigeria’s external reserves have declined by 24.2 percent year-on-year to $33.9 billion as at April 15, 2020 from $44.7 billion as of April 15, 2019, data obtained from the Central Bank of Nigeria (CBN) website indicated.
Since the outbreak of coronavirus in China, oil price (Brent Crude) has fallen to as low as $28.65 per barrel on Friday, from the peak of $68/barrel in January 2020.
The CBN adjusted the exchange rate from N360 to N380/US$ at the I&E window, to stem the pressure in the foreign exchange market.
“The sudden deep crash in oil prices is a seismic shock for a country like Nigeria which relies on oil exports for over 60 percent of its government revenues and over 80 per cent of foreign exchange earnings,” Aishah Ahmad, deputy governor, Financial Systems Stability Directorate said.
She said in her personal statement at the last Monetary Policy Committee (MPC) meeting that the exit of foreign portfolio investors from emerging markets, due to rising global investor risk aversion, is a double whammy for foreign reserve levels and exchange rate stability. Whilst reduced forex demand due to restrictions in travel and global trade are somewhat compensating, it is reasonable to expect some exchange rate pressures which may also worsen inflation expectations in view of the high pass through to domestic prices.
The pandemic, she said, may temporarily exacerbate an existing trend of rising domestic prices in the short term. Headline inflation (year-on-year) rose for six consecutive months to 12.20 per cent in February 2020 from 11.02 per cent as at August 2019 largely driven by the food index, which increased to 14.90 per cent from 13.17 per cent, over the same period.
Obadan Mike Idiah, a member of the MPC, said the country has no fiscal buffers to fall back on when there are unfavourable disturbances in the world oil market as is currently the case as a fall-out of the corona virus pandemic. The Excess Crude Account is less than US$ 80.0 million while the Sovereign Wealth Fund has about US$ 2.0 billion compared to Saudi Arabia’s over US$ 500.00 billion. Nigeria thus has very limited financial capacity to deal with the social and economic impact of the coronavirus.
Hope Moses-Ashike
