Naira depreciation may extend bearish trend

Proshare

By Udeme Ekwere

 

Experts in the Nigerian financial sector have stated that if not quickly addressed, the current naira situation in Nigeria can further degenerate activities in the Nigerian capital market.

 

According to them, it is not possible to fully separate happenings in the economy from the activities in the capital market.

 

Speaking with our correspondent on Friday, the General Manger, DBSL Securities Limited, Mr Emma Eze, said that the capital market was already feeling the impact of the fall in the value of the naira.

 

He said, “The fall in our naira’s value is an economic issue, and the Nigerain capital market is a strong driver of activities in our economy, and so, there is bound to be a serious impact of this fall in trading activities.

 

“You know that presently, our market has been experiencing serious instability with activities going up and down in a cycle, now, if the issues with the devaluation of the naira now come to join, then it becomes a major issue, as there will be a reduction in the liquidity level in the market.”

 

He said this was not good for the market as it would have a negative impact and reduce investor confidence in the market, which regulators have been trying to boost in the last few months.

 

The currency market has been rife with fears the naira might sag to about N170 a dollar before the end of January unless the Central Bank of Nigeria took more proactive measures to arrest the rapid decline.

 

But in spite of a number of measures which the apex bank has adopted, the naira has continued to nose-dive against the dollar.

 

Market operators insist that in the absence of clarity from the CBN in regards to its foreign exchange policy and limited ability (and willingness) of the central bank to meet demand for dollars, as well as negative market sentiment, the depreciation of the naira was likely to persist in the coming weeks.

 

The Managing Director/Chief Executive Officer, Lambeth Trust and Investment Limited, Mr. David Adonri, called for a reduction in the supply of the naira in the foreign exchange market.

 

He said, “As an import dependent economy, falling naira value will precipitate an increase in inflation. To curtail the declining value of the naira to ensure short term price stability, monetary authorities need to reduce the supply of naira in the foreign exchange market.

 

“This can be done by mopping up excess liquidity in the economy, curtailment of public sector recurrent expenditure.”

 

He also suggested that the curtailment of frivolous demand in hard currencies allocation should be limited to financing essential and strategic importation. - Punch

 

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