It is not The Economist’s fault not to be a believer that Naira will improve to N600/$ as the Nigerian government has posited: “The forecasted devaluation is considered a larger correction, resulting in an adjusted average exchange-rate forecast of N1,068.3:US$1, compared to the previous projection of N914.4:US$1.”
“We have revised our exchange-rate forecast to front-load a larger devaluation in 2025, to reflect a widening gap between the official and parallel-market exchange rates. We expect another attempt at exchange-rate convergence that year, meaning a larger correction.
“We have adjusted our average exchange-rate forecast for that year to N1,068.3:US$1, from N914.4:US$1 previously. As our forecast for continued currency losses over time has not changed, the projected rate is also now weaker for later years.
“A larger devaluation will have limited pass-through, given the size of the parallel market, but our forecast for average inflation in 2025 has been revised up by two percentage points, from 15.1% to 17.1%,” the EIU said.
Indeed, when you prefer foreign SUVs over local ones, etc, you do not provide any room for Naira believers. In 1979, Nigeria did not grant free cars to lawmakers. Then, if you could not afford a car, you take a loan from the government which must be approved by your bank.
Today, we have scaled the wrong mindsets and those are affecting the Naira. Yet, I am hoping that Nigeria is right and The Economist is wrong; we need Naira to strengthen because that is our own currency.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
My response on timing: I am not sure I have written taking a Long bet on the Naira. In investing, there is nothing like long or short, what matters is TIMING. That timing could be anytime. Naira fell N200 over a weekend when it rose N220 a weekend before, if you look at TIMING, you can still be good depending on when IN and OUT. So, “long bet” is not a strategy and I never recommend “long” just because it is longer!
Comment by user: In investing, taking Long position simply means the investor is optimistic, therefore, buying. Going short means investor is pessimistic, therefore selling. It’s not really about timing, though timing is important.
My Response: What is “long” for a recent college graduate may not be for a 76-year old man. In banking, the assets you recommend will vary because of many factors but dropping “long” is not wisdom. Optimism is not just for the asset movement, you must also consider the player. That said, I never recommended any long bet on Naira.
User comment: I’m aligned with you Prof. Given the tribal nature of the country, it is unlikely that the people can forge any sensible leadership and governance model, or coalesce around any meaning aspiration / vision, which is the basis for optimism and turnaround. Until you begin to see those signs, hold your short positions.
---
Register for Tekedia Mini-MBA (Jun 3 - Sep 2, 2024), and join Prof Ndubuisi Ekekwe and our global faculty; click here.