By Odunewu Segun
With the Naira plunging to N400 to a dollar at the parallel market on Thursday, Financial experts have said that if the naira continue to fall, the country would need to brace for higher rates of inflation and further contraction in economic growth.
According to the Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu, the continued fall in the value of the naira against the dollar and pound sterling would lead to increase in the prices of commodity.
Other analysts linked the development to the activities of speculators and significant demand by manufacturers and importers whose demand was not being met at the interbank market.
Currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said, “The issue still has to do with inadequate forex supply. As far as you continue to have some 41 items banned from the interbank market, importers and manufacturers of those items will continue to seek for forex at the parallel market.”
According to Ezun, the global plunge in oil prices has affected the capacity of the Central Bank of Nigeria to defend the naira. “If the price of oil should go up, more forex will come in and you will see that things will change,” he added.
A Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Sherrifdeen Tella, said the huge demand for dollars could be due to the activities of genuine manufacturers and importers seeking forex for production and business purposes, or corrupt people who had stolen state funds.
“The naira is falling at the parallel market because there is scarcity at the interbank market. This fall could be due to the activities of genuine manufacturers or some people you cannot identify. These are people who have stored naira somewhere and are seeking to convert them to dollars. They use every chance they have to buy dollars. What the CBN may need to do is to neutralise that money by changing the colour of the N500 and N1, 000 notes.” He said
The National President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, said the fall in the naira value could be linked to the activities of speculators. “The demand is spurious; the challenge is that there is no liquidity in the market. If you ask any of the parallel market operators calling N400 per dollar to bring the dollar that you want to buy it, they don’t have.”