Naira Dipped to 423 Against the US Dollar After Recession Announcement

September 1, 2016, 2:19 am

Nigeria’s currency, the naira dipped to 423 against the dollar at the parallel market on Wednesday, August 31, 2016 after the National Bureau of Statistics announced an official recession in the economy.

The naira opened at 418/$1 on the day, but slipped to 423 after the NBS announced the worst economicrecession in 29 years.

The Euro and British pound  traded at N461 and N535 at the parallel market, while the official market remained relatively unchanged.

Lukman Otunuga, FXTM research analyst, said the recession has brought about an undeniable feeling of disappointment in the economy, affecting the naira.

“An undeniable feeling of disappointment engulfed the Nigerian economy on Wednesday following the 2.06% contraction in the second quarter GDP which confirmed that the nation had descended into a technical recession,” he said.

“The signs of an imminent slowdown were already visible with the Central Bank of Nigeria’s reserves falling to 19 billion as the nation struggled to support its local currency.

“While Naira’s vulnerability was highly expected following the official floatation, external risks such as a resurgent Dollar has accelerated the devaluation of the local currency consequently pressuring the nation further.

“With inflation and unemployment hovering around worrying levels, the CBN has been placed under immense pressure to act which may weigh on investor sentiment.

“While the News of Nigeria entering a recession may be painful, this should be no surprise as the incessant declines in oil prices have punished heavily oil export nations with Nigeria being no exception.”

Otunuga said the weakness of the naira may do good to Nigeria by attracting more foreign investors into the economy.

“Although sentiment towards Nigeria remains bearish, it should be kept in mind that the blueprint to diversify and break away from the curse of oil reliance is already in process,” he said.

“The government has already approved a conservative three-year budget with plans to reinforce infrastructure, services, manufacturing and agriculture are in place. Naira’s weakness may attract foreign investors in the future which could ultimately uplift overall GDP.

“Nigeria is undergoing a major structural change and although there is a risk of extended periods of low growth, this transition could be something which exceeds all expectations.”

Credit:  The Cable

Follow us on Twitter @theglobengr

Like this story? Get on the list for updates...it's FREE!.

Related News

LATEST POSTS

Tuface, Annie in Benue To Support Flood Victims

The popular musician, Innocent Idibia, popularly known as TuFace, has arrived at the camp for internally displaced persons in Makurdi, the Benue St....

UEFA Extends Kit Assistance Scheme to 2022

UEFA has extended its successful Kit Assistance Scheme, which supports Europe’s smaller national associations....

We're ready to prove Judiciary wrong, says Uhuru, asks IEBC to set dates

President Uhuru Kenyatta has asked the electoral agency to announce the dates for the repeat presidential elections as soon as possible.

....

IEBC Made Deliberate Mistakes, NASA Lawyers Tell Supreme Court

Presidential election results declared were not based on evidence, Raila Odinga's lawyers have said, citing the mismatch of results in Forms 34....

Uber Picks Expedia's Dara Khosrowshahi As New CEO

Uber Technologies Inc chose Dara Khosrowshahi, the chief executive of travel company Expedia Inc, as its chief executive on Sunday, according to tw....

Share