Macroeconomic Report & Economic Updates
February 26, 2016
Nigeria Economic Update (Issue 9)
The naira depreciated by 8.2 percent from
N305/$ on February 5th, to N330/ $ on February 12th 20166. The apex body identified the
increased domestic demand for forex to pay for foreign medical treatments and
schools fees (15 percent of total demand) 7 as the main drivers. As
a result, the apex bank is considering to discontinue the provision of forex for
payment of medical bills and school fees abroad and to re-channel the forex
towards the manufacturing sector of the economy. With the continuous
depreciation of the naira, and the CBNs resistance from calls to devalue the
currency, the options for alternatives measures seem to be diminishing.
Related
Nigeria Economic Update (Issue 37)
Recent
data by the CBN shows a decline in manufacturing capacity utilization by 2.0
percentage points to 50.7 percent in 2016Q2. Foreign exchange
challenges in addition to cash squeeze in the review quarter, led to the
decline in capacity utilization. This has hindered activities in the sector
while impacting negatively on business confidence. Nonetheless, the CBN
recently directed authorized FX dealers to dedicate 60 percent of FX purchases
to manufacturers. This policy measure is therefore expected to meet
the sectors critical FX need for the purchase of imported raw material and
other machineries, while boosting the potential for economic growth in the long
term.