BREAKING: Naira Crashes Above N600/$ At Aboki Black Market, See New Exchange Rate

Optics

• In an environment where people have become accustomed to ultra-easy credit, higher rates are likely to cause significant volatility. It might also boost the Dollar’s yield appeal, boosting demand for the greenback even more. Hence, servicing sovereign bonds issued in dollars could be a difficult task for countries that have dollar debt.
• Furthermore, if economic activity weakens, developing economies’ currencies may suffer a double blow as demand for risky assets dwindles.
• Unfortunately, Nigeria’s trade fundamentals haven’t changed: Nigeria’s capital inflows plummeted to a four-year low of $9.66 billion in 2020, only to drop further to $6.7 billion in 2021.
• As Nigeria went through its historical trading deficit, international commerce remained a vital concern. Nigeria’s international trade balance for 2021 has slipped to a record-high deficit of N1.94 trillion. Nigeria’s exports increased by 51% to N18.91 trillion in 2021, compared to N12.52 trillion the previous year.
• However, the increase in export revenues was insufficient to compensate for a 64.1% increase in import expenses, which totalled N20.84 trillion. In 2021, a $5.26 billion negative balance of payment was created as a result of the FX outflows, placing even greater pressure on the local currency and necessitating the use of the external reserve.