Share
CFG Advisory: COVID-19 shock & naira devaluation to negatively impact Nigeria
CFG Advisory says the pandemic shock and the naira devaluation are expected to have a negative impact on the Nigerian economy. Tilewa Adebajo, CEO of CFG Advisory joins CNBC Africa for more.
Tue, 28 Apr 2020 14:17:03 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The Naira has been severely devalued over the past 20 years, with a 400% decrease on average, creating instability in the foreign exchange market.
- Efforts to harmonize Nigeria's multiple exchange rates have been slow, despite calls for a more market-driven approach to stabilize the economy.
- A further devaluation of the Naira is projected due to the country's fiscal deficit and declining oil revenues, necessitating the adoption of a flexible exchange rate mechanism.
Nigeria, one of Africa's largest economies, is currently facing a double whammy of economic challenges with the ongoing COVID-19 pandemic and the devaluation of its currency, the Naira. Tilewa Adebajo, CEO of CFG Advisory, recently discussed the impact of these factors on the Nigerian economy in an interview with CNBC Africa.
Adebajo highlighted the significant devaluation of the Naira over the past 20 years, with a staggering 400% decrease on average. Despite recent efforts to address the issue, Nigeria's currency has still suffered a 100% devaluation in the last four years. The lack of a market-driven exchange rate mechanism has contributed to the Naira's instability, especially in comparison to other major currencies like the dollar and the pound.
The Nigerian government has been urged to harmonize its multiple exchange rates to stabilize the market, but progress has been slow. Adebajo emphasized the need for more decisive action to address the economic challenges facing the country. He pointed out that Nigeria's current fiscal deficit, coupled with the sharp decline in oil prices, has put immense pressure on the government to seek external funding and reevaluate its debt repayment strategy.
Given the dire fiscal situation, Adebajo predicted that a further devaluation of the Naira is inevitable. He stressed the importance of implementing a market-driven exchange rate mechanism to manage the impact of devaluation and restore stability to the economy. Adebajo also recommended the introduction of features contracts in the foreign exchange market to reduce speculation and enhance functionality.
As Nigeria braces for the potential consequences of a depreciating currency, questions have arisen about the economy's ability to withstand further devaluation. Adebajo acknowledged that while the prospect may be grim, embracing a flexible exchange rate policy is crucial for navigating the current economic challenges.
In conclusion, Nigeria finds itself at a critical juncture, grappling with a perfect storm of economic crises. The government's ability to implement effective reforms and chart a path towards economic recovery will be vital in determining the country's future prospects.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.