Dear Subscriber,
Bright days ahead for the naira
After appreciating in Q2’24 to N1,525/$, the naira has traded within a tight range of N1,500/$ to N1,615/$ over the past two months, indicating its relative stability in the forex market. This reduced volatility is due to several factors, including the reintroduction of the retail Dutch auction system in which $876mn was sold, higher interest rates, tight liquidity, and challenges in selling cumulative inventory.
Additionally, many oil marketers who typically book forward contracts of up to 90 to 120 days have started going short due to concerns that products from the Dangote refinery will soon enter and saturate the market. These combined factors have led to buyer tentativeness and reduced demand for forex.
Looking ahead, if the money markets remain tight, interest rates stay high and the seasonal effect of the import duty waiver diminishes, we expect the naira to appreciate to N1,450/$ and N1,893/£ at Christmas. This appreciation could also be supported by the main crop cocoa harvest and inflows by returning friends and family in December.
From “Hot Money” to “Deep Money” – strategies for foreign direct investment
It is no news that President Tinubu’s administration has adopted an investment-led strategy to drive inclusive & sustainable economic growth in Nigeria. The growth strategy draws from the examples of the Asian Miracle economies of the 1990s and recently Vietnam & Malaysia. Most noteworthy of the recent success stories is India. FDI in India has grown 31 times over to approximately $70.9 billion in 2022-2023 from $2.2 billion in 1999-2000. Some key policies that aided this growth include deregulation and privatization, removal of tariffs and licensing requirements, and huge spending on infrastructural development. These reforms, which address the business environment, are long-term strategies Nigeria needs to focus on to put the economy on a sustained positive growth trajectory. Growth in FDI inflows into the country promises increased productivity, technology transfer, job creation, and improved human capital.
In this latest edition of Whispers, the FDC Think Tank takes a deep dive into recent economic developments and their impact on your business and corporate strategy.
Enjoy your read!
