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 “A stitch in time saves nine” is not the story of Nigeria’s forex problems

Of the many conspicuous macroeconomic issues plaguing the Nigerian economy, the depreciation of the naira in the forex market has become the focus of all economic agents (government, investors, business owners, and consumers).

With the naira consistently losing value from N365/$ before the pandemic to N740/$ now, the CBN may be forced to adopt the managed floating exchange rate system as a strategy for achieving exchange rate convergence. The I & E, rate of N437/$ will have to move closer to a market-driven rate. As of today, the parallel-official market rate premium is N307, up 134.4% from a year ago (N131). However, we believe the CBN will continue to intervene in the forex market in the near term, with a combination of forex rationing and trade restrictions.

The main issue for the apex bank is the lack of forex. And with Brent dipping below $85pb, the FG’s revenue woes are bound to get worse and the CBN’s hope of achieving price and exchange rate stability before the 2023 elections may be far-fetched.

Unsustainable debt is a dark cloud hovering over Nigeria

Nigeria is on the verge of a debt overhang as a result of an overambitious budget centered on administrative expenses and no clear-cut increase in revenue generation sources. As of Q2’22, external debt stock rose to $40bn from $38.4bn in Q4’20. The county’s total public debt stock is a whopping $103.3bn. Sadly, the debt crunch will be there in the long term and will continue to hinder investment inflows. The excruciating debt service burden will continue until there is an amenable debt rescheduling package.

In this edition of the FDC monthly publication, the Think-Tank analyzes Nigeria’s debt, the living income differential policy for cocoa farmers, and other major economic events in Nigeria.

Do enjoy your read!