Sunday, September 28, 2025
27.2 C
Lagos

Nigeria Must Rethink Forex Policy to Spur Investment

There is need for Nigeria to seriously rethink her Forex policy to spur investment and quicker economic recovery. At the same time, the country recorded growth of only 3.96% y/y in Q1, 2015, down from 5.9% in Q4-2014, according to Razia Khan, Economist at Standard Chartered Bank, London.

She said Nigeria’s oil sector contracted by 8% y/y in Q1, following growth of 1% in the previous quarter. “Decelerating growth was seen across most sectors in Q1, with the exception of crop production. Q2 growth may be slower still, reflecting a slowdown in activity around the elections, and the transition to a new government.”

She said the severity of fuel shortages in May, culminating in a shortfall in imported diesel for generators, had a more pronounced impact on the services sector than is typically the case, just as growing queue for foreign exchange, as Nigeria’s ‘order matching’ FX system fails to meet all demand, may result in a further delay to corporate investment plans, potentially postponing recovery.

Khan also projects slow growth in the first half of 2015, with some recovery in the second half of the year. “However, downside risks
to our full-year forecast of 4.5% GDP growth still predominate. We are constructive on the outlook for oil in H2-2015. We expect oil prices to rebound to c.USD 80-90/bbl. Higher oil earnings should provide some boost to activity. “

She advised that Nigeria’s changing economic fundamentals call for a rethink of foreign excahnge policy, in order to better absorb external shocks. “We see Nigeria’s current account surplus moving to a deficit, both in 2015 and in the years ahead. The pace of accumulation of new FX reserves will not easily support a fixed exchange rate system.

With a fixed exchange rate, FX reserves rather than the NGN bear the brunt of any external shock, hurting Nigeria’s creditworthiness, and potentially raising the cost of any external borrowing. Near-term, constrained FX availability also exerts a cost on the real economy, adding to uncertainty and delaying investment activity.

The risk is that the longer it takes to re-open the FX market, the greater.”

spot_img
spot_img

Hot this week

AIICO Deepens Bond with Retirees, Holds Annuity Forum in Lagos, PH

Mr. Gbenga Ilori, Head, Retail Business at AIICO, in...

Sovereign Trust Insurance Holds 30th AGM

L-R: Eric Balogun, Independent Director, Emi Faloughi, Director, Kayode Adigun,...

Unity Bank Shareholders Approve Merger with Providus Bank

  EGM: From left: Mr. Usman Abdulkadir, Executive Director, Risk...

NNPCL: Ogoni Re-entry is a Beacon of Reconciliation through Collaboration

The re-entry into Ogoniland marks a historic turning point...

NLNG, NCDMB Celebrate 122 Graduates of Train 7 HCD Training Program

NLNG in collaboration with the Nigerian Content Development and...

Topics

AMCON, ESVARBON Partner on Sale of Assets

The Managing Director/Chief Executive Officer, Asset Management Corporation of...

New NEXIM MD, Abubakar Bello, Assumes Office

The new Managing Director of the Nigeria Export-Import Bank (NEXIM), Mr...

Samsung Smartphone Shipments Return to Growth in Q3 2015

According to the latest research from Strategy Analytics, global smartphone shipments grew 10 percent annually to reach 354 million units in the third quarter of 2015. Samsung grew its smartphone shipments six percent and finally returned to positive growth for the first time in over a year. Linda Sui, Director at Strategy Analytics, said:

CBN: ‘Heritage Bank is Strong, Healthy’

The Central Bank of Nigeria (CBN) has debunked widespread...

PenCom to Newspaper Owners: Clear N720m Pension Debt

From Left: The Director General of the National Pension...

The Role of Insurance in Aviation Business

Being text of the speech delivered by Mr. Olusegun...

Stanbic IBTC: 7 Months of Rewarding Customers in Reward4Saving Promo

In a bid to keep inspiring Nigerians to develop...
spot_img

Related Articles

Popular Categories

spot_imgspot_img