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Dipping oil prices putting Naira under pressure, how badly is this affecting Nigerian economy?
A spike in parallel market rates in the past few days has seen the Nigerian Naira come under pressure in recent days, but the Central Bank of Nigeria (CBN) maintains that market fundamentals do not support devaluation at this time. The CBN says it is investigating to clamp down on people involved in speculative market behaviour. As Nigerians also await communication from the committee set up to assess and respond to the impact of the coronavirus on the 2020 budget and Nigerian economy, Andrew Nevin, Partner and Chief Economist at PwC Nigeria and Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria joins CNBC Africa to assess how recent developments impacts Nigeria's economy.
Fri, 13 Mar 2020 12:02:29 GMT
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AI Generated Summary
- Andrew Nevin highlights the challenges posed by the significant drop in oil prices and the economic impact of the coronavirus outbreak on Nigeria.
- Aminu Gwadabe discusses the market dynamics and the efforts to maintain stability in the foreign exchange market.
- Experts emphasize the need for structural reforms, policy responses, and measures to attract investments to address the vulnerabilities in the Nigerian economy.
The recent spike in parallel market rates in Nigeria has led to the Naira coming under pressure, with concerns arising about the impact on the country's economy. The Central Bank of Nigeria (CBN) has stated that the market fundamentals do not support a devaluation of the Naira at this time, but experts are weighing in on the situation.
Andrew Nevin, Partner and Chief Economist at PwC Nigeria, expressed his concerns about the current economic climate. Nevin highlighted the significant drop in oil prices, with the cost of Nigerian oil being affected by the global situation. He pointed out that the price of oil, currently at $35 per barrel, has led to challenges in selling Nigerian oil, potentially causing a substantial loss in revenue for the federal government. Nevin also touched on the impact of the coronavirus outbreak, mentioning the devastating economic effects being felt in countries like Italy, Japan, and South Korea.
Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria, discussed the market dynamics of the foreign exchange situation. While acknowledging the challenges posed by COVID-19 and recent market fluctuations, Gwadabe emphasized that panic buying and portfolio adjustments have played a role in the volatility. He commended the CBN's efforts to maintain stability through enhanced monitoring and collaboration.
The conversation then shifted to the necessary reforms and policy responses to address the vulnerabilities in Nigeria's economy. Nevin highlighted the need for structural changes and emphasized the importance of addressing long-standing issues such as power sector reforms. He expressed the view that the current economic shocks might necessitate tough decisions and structural reforms at both the federal and state government levels.
Gwadabe echoed the sentiment of implementing policies that discourage market manipulation and ensure compliance within the financial system. He stressed the importance of maintaining the exchange rate stability and called for structural changes to prevent undue disruptions in the market.
In terms of investment prospects, Nevin advised investors to adopt a wait-and-see approach given the uncertain global economic landscape. He pointed out the flight to safety in times of market turmoil and noted the need for Nigeria to attract direct investments through simplifying business processes and encouraging private sector participation. Nevin expressed optimism that with the right structural changes, Nigeria could experience significant growth in the upcoming months.
As discussions concluded, the outlook for the Nigerian economy remains uncertain. While challenges persist, experts believe that decisive policy responses, structural reforms, and a focus on attracting investments could help steer the country towards economic recovery and growth in the face of the current global challenges.
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