US dollar is on the rise, its value is near record high exchange rates compared to other currencies.
Gatekeepers News reports that the exchange rate between the Naira and the US dollar according to the data released on the FMDQ Security Exchange the official forex trading portal showed that the Naira opened at ₦427.00 per dollar on Friday, July 22, 2022, and closed at ₦430.00 per $1 on Friday, July 22, 2022.
The dollar opened in the parallel market for ₦652 per $1 today, although the CBN does not recognise the parallel market, otherwise known as the black market.
One of the reasons the value of the US dollar is increasing is because the American country is recovering better than most other economies and stock markets around the world.
Also, the rise is due to global inflation whereby the value of other countries’ currencies depreciate, rising interest rates in the US with room for more interest rate adjustments and ever spiking threats of slower growth and even recessions in Europe due to the Russia-Ukraine war.
What It Means For Nigeria Economy
Although, the continuous rise in the strength of the dollar may be good news for savers with USD holdings, but it poses a great risk for emerging economies including Nigeria.
It will not only put pressure on Naira and cripple it, but also raise export costs, and escalate inflation.
Stronger US dollar will also make debt more expensive, that is, it will be more difficult for corporations and institutions that borrowed in dollars, as they may be put under extra strain in servicing the dollar loan, if their earnings do not increase in lockstep.
Similarly, Nigerians import nearly everything they consume including petroleum products after exporting crude. Gatekeepers News recalls that on June 23, 2015, the Central Bank of Nigeria (CBN) restricted access to foreign exchange to some 43 food and non-food items that can be produced in the country.
Nigeria is a mono economy that depends on crude oil as a major source of revenue. Unfortunately, it does not refine this product and therefore uses its scarce foreign exchange to import refined products and eventually pay subsidy on same commodity.
Also, foreign investments from the United States and other developed countries would reduce in Nigeria and
higher rates in the US would make investors to return to the US capital markets – this will cause a decline in the nation’s capital inflows.
In what appears to be an attempt to prevent further devaluation of the naira and the country’s economy, the CBN, last week, warned politicians who sought to convert the Naira from their accounts into foreign exchange for election campaigns.
The CBN governor, Godwin Emefiele, at the post-Monetary Policy Committee (MPC) meeting briefing, said the apex bank would place a post-no-debit on the bank account(s) of the customers who convert the Naira from their accounts into foreign exchange for electioneering spending, stressing that it would use the tools at its disposal to check the movement of illicit funds.
