In the last few days of last week, the recovery of the Nigerian currency, the Naira, had investors skeptical that the rally would last.
On Thursday, and Friday last week, the Naira strongly rebounded and recovered to N670 to a dollar from a low of N900/$1 at the black market.
Naira also strengthened against Pound Sterling, gaining about N165 or 16.4 per cent to N840, from a record low of N1,005 per Pound.
At the official Investors and Exporters (I&E) window, the local currency also recorded modest appreciation against the dollar and other major foreign currencies.
However, Market watchers have expressed serious concern on the sustainability of Naira rebound.
One of the experts is the Director General of the Centre for Development of Small and Medium Scale Enterprises, Muda Yusuf, who said Naira’s annihilation and its sudden rise have created serious anxiety and dislocation in the manufacturing sector.
“It has worsened the problem of uncertainty in the manufacturing sector because no one is exactly sure any longer where things are going,” said the former Director General of Lagos Chamber of Commerce and Industry (LCCI).
He also noted that in addition to speculations about CBN injecting dollar liquidity in the forex market, the rumoured news that the US government would no longer admit dollars that were printed in a certain year (2021) as legal tender could have also aided the rapid drop in dollar value, stressing that market thrives on information.
“We are still watching because we’re dealing with a volatile situation. No one can tell how this situation will last. It is still a volatile market.
“But, I think it is rather readjusting back to the level where the exchange rate was before the CBN announcement which triggered the sharp rise in the dollar against the Naira. The most important thing is that the initial reaction to the CBN announcement is beginning to settle,” Yusuf concluded.
On how the situation impacted the manufacturing sector, he disclosed that manufacturers had adjusted the prices of their products on the shelf upwards before the dollar-naira exchange started to normalise back to what it was before the CBN announcement.
Also, Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, said the naira was falling on the back of heightened forex demand compared to limited forex supply.
He said: “Nigerian consumers, businesses, and individuals alike are facing challenges and headwinds and are reeling in an atmosphere of hopelessness. This is because of a myriad of factors.
“Notably, the precipitous fall of the naira in the forex market, the power supply shortage, and now the almost unaffordable diesel price.
“In spite of the hike in interest rates, we are witnessing what some analysts fear may become a bout of runaway inflation. Inflation is not just domestic but global.”
For Tajudeen Olayinka, an investment analyst, the rebound of the Naira can only be sustained if the rise happened naturally by adjustment of the imbalances on both sides of demand and supply.
“If this rise we have witnessed is an outcome of the forces of demand and supply. But we don’t have that information yet. Therefore, it will be too premature to conclude that the appreciation in Naira value is a natural occurrence.”
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