22nd March, 2020
The devaluation of Nigeria’s currency Naira by the Central Bank of Nigeria from the official rate of N307 to N360 has triggered mixed reactions from analysts.
Prof. Uche Uwaleke, a professor of Finance and Capital Market at the Nasarawa State University said the devaluation of the nation’s currency by the Central Bank of Nigeria (CBN) will discourage round-tripping and return of foreign investors.
He said the devaluation would have positive implications for financial markets.
Uwaleke added that the development would encourage return of foreign investors who left our financial market because of multiple exchange rates.
On the flip side, he noted that the development would have negative implications for inflation and the 2020 budget predicted on N305 per dollar.
Prof. Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun, said the news of the naira devaluation was not surprising but was unfortunate.
“The pressure in the foreign exchange market we have witnessed in the last few weeks was not caused by the demand for foreign currency to buy inputs for production.
“It’s from people who are trying to hold foreign currency either for the speculative purpose for possible travels or to lodge the same in their foreign accounts where BVN is not available to reveal their identities.
“So, devaluing the currency will encourage further speculative attack on the naira. Haven emptied the sovereign wealth fund (SWF) account and Excess crude account, the CBN should not have taken this panic measure now that the recession has not taken root in the economy.
“It was a wrong move that was not based on the causal factor of the foreign currency demand pressure,” Tella said.
The Central Bank of Nigeria said it merely adjusted the price of Naira and did not devalue it as reported.