Macroeconomic Report & Economic Updates
March 13, 2017
Nigeria Economic Update (Issue 8)
The falling tide in the international value
of Naira experienced a reversal in the review week with naira appreciating
significantly by 11 percent from N516/$ on February 17, 2017 to N460/$ on
February 24, 2017 at the parallel market the first appreciation
since December 2016. The recent rise in naira value was driven by forex
supply-demand gap closure, sequel to improvements in dollar liquidity. The
recent CBN Special intervention (e.g. the auction and sale of $370 million and
$1.5 million respectively, by the apex bank during the week) and its
revised forex policy guidelinescontributed in dousing speculations
in the parallel market, thus gradually narrowing the margin between the
interbank and parallel market rates. Given that the sustainability of naira
appreciation is strongly hinged on the improvement in foreign reserve which is
largely dependent on crude oil sales, the government should continue its
efforts at calming tensions in the Niger Delta region.
Related
Nigeria Economic Update (Issue 35)
Recent report in the media highlights that Nigerias
GDP has dropped to $296 billion in 2016, in contrast to the $481 billion
recorded in 20151 and Nigeria has lost its position as Africas
largest economy to South Africa. This conclusion was based on the computation
of GDP with current naira-dollar exchange rate. However, while the naira has
significantly lost its official value since the adoption of a flexible exchange
rate, estimating GDP merely with a single exchange rate figure (rather than its
yearly average) cannot be regarded as an appropriate method to conclude on Africas
largest economy.
Nigeria Economic Update (Issue 7)
External
reserve dropped slightly by 0.6 per cent from $28.35 billion in January 22 to
$28.19 billion in January 295. Considering the continuous decline, government
has stepped up efforts towards financing the deficit in the proposed budget
through borrowing. At the forex market, the official exchange rate remained
unchanged at N197/$ while the naira depreciated at the parallel market by 2.36
percent from N297/$ to N304/$ between January 22 and 296. Despite
the huge spread between the official and parallel market exchange rates, the
monetary authorities maintained its fixed exchange rate regime at the official
forex market. It is expected that if the demand pressure for dollar persists,
the value of naira may decline in the near term.