In the Igbo Nation, the elders will say that “a bird which flew from the ground only to perch on an ant-hill is still very much on the ground.” That takes me to the revelation that Nigeria is burning foreign reserves at an unprecedented rate just to defend the Naira: “Nigeria’s Central Bank is facing scrutiny as its foreign-exchange reserves rapidly deplete, marking the fastest decline in four years. Bloomberg reports …This alarming rate is attributed to the CBN’s efforts to support the naira, raising concerns about the future stability of Nigeria’s economy.”
As I have noted, Nigeria has the tools and resources to win the battles for Naira against US dollars, Euro, etc. The real issue is finding a way to win the war. Yes, six months ago, I wrote: “Sure, Nigeria has tools which can bring Naira back to sub-N800/$ … And the government can actually get Naira back to whatever number it wants with the US dollars. The real challenge is a long-term playbook. Yes, how do you keep Naira stable over a long-term view via endogenous policies which support Naira from inside to outside?”
Draining foreign reserves to boost Naira is part of the game. But we must also think about what happens if the reserves finish. Indeed, it is beyond financial engineering because defending Naira must go through factories and warehouses (old and new) if we hope to win this war, and not engage in the battles of currencies every year.
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Nigeria is burning through foreign-exchange reserves at a rate not seen in four years, raising concerns that the central bank is depleting its dollar holdings to support the naira after pledging it would allow the currency to float more freely. Liquid reserves declined 5.6% since March 18, when the naira started its rebound from record-low levels against the dollar, to $31.7 billion as of April 12, according to Bloomberg’s calculations based on the latest available data from the Central Bank of Nigeria. That’s the biggest decline in a similar period since April 2020, according to data compiled by Bloomberg.
The Central Bank of Nigeria has two strategic jobs – strengthen the currency through management of inflation, and deepen employment through interest rate management. Over the last 15 years, we largely neglected the second part and that is why youth unemployment is high. That must change!
The reserves data and it correlates with the movement of Naira/USD. Largely, we are fighting with the reserves to defend Naira in Nigeria.
In the Igbo Nation, the elders will say that “a bird which flew from the ground only to perch on an ant-hill is still very much on the ground.” That takes me to the revelation that Nigeria is burning foreign reserves at an unprecedented rate just to defend the Naira: “Nigeria's… pic.twitter.com/92jeUN9TIr
— Ndubuisi Ekekwe (@ndekekwe) April 16, 2024
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The same goes for petrol subsidy, we are paying trillions in subsidy, and we are spending billions of dollars to defend the naira. Choose what you want believe about the APC government, but truth is never one of its strong points. It’s not like we are not aware, but when you see people salivating on the propaganda around both petrol subsidy and naira floating, you can only wait until reality sets in.
Back to where we took off from, but with more deficit anyway. Yea, give them something to yammer about, and they keep yammering.