How To Save Naira From Further Depreciation—Experts

Nigeria has not been able to secure a consistent flow of foreign exchange to reposition the Naira as a store of value, the Chief Executive Officer, Afriswiss Capital Asset Management, Kalu Aja, has said.

The country, despite the huge demand for foreign exchange, will today commence international flight operations.

The Central Bank of Nigeria had directed sales of dollars to those in need of forex for travels among others.

This is expected to further increase the pressure on the demand side of the foreign exchange market.

While the CBN had on Monday commenced sales of foreign exchange to banks, that of Bureau de Change operators is being planned to begin on September 7.

Deposit Money Banks have since the commencement of liquidity injection into the foreign exchange market begin to sell $25m daily.

Through the sale of foreign exchange, the CBN is expected to clear $2bn arrears in the forex market.

Aja told THE WHISTLER in an interview that with the re-opening of International flight today, demand for dollars would be on the increase.

He said, “Demand for dollars will rise with international flights, but the real demand pressure is coming from inflation fears and fall in risk free asset returns (Treasury Bills).”

The expert explained that the Naira is losing its function as a store of value because of inflation.

Aja urged the apex bank to address the issue of providing liquidity through adequate supply of foreign exchange to the market.

He said that Africa’s largest oil exporter has not been able to secure a consistent and investment centered flow of forex into the economy.

He said if Nigerian fails to address supply shortfalls, demand pressure would continue to persist.

Also speaking, a Professor of Capital Market and President, Association of Capital Market Academics of Nigeria, Uche Uwaleke, said CBN resumption of sales to banks to clear arrears of forex demand and as well sale to BDCs would in a way reduce pressure in the market.

Nigeria’s reserves have been pressured by the fall in oil pieces which is Nigeria’s major source of foreign exchange.

The country’s reserves according to official data stands at $35.66bn as of September 2.

The Chief Executive Officer Cowry Asset Management, Johnson Chukwu, also said the inability of the country to diversify its revenue sources is causing pressure on the Naira.

“As it stands today if you look at all the variables, it looks to me like we will see the foreign exchange reserve still continue to come under pressure.

“The Q2 capital importation which fell to $1.29bn and the country’s export of crude “will still not be enough to offset the shortfalls from capital importation and home remittances.”

Chukwu said all the sources of the country’s foreign exchange has come under pressure over the past couple of months and will continue to be under pressure in the coming months.

He said the pressure would only reduce when global economy fully recovers.