Commodity exporters around the world have seen sharp depreciations of their currencies, as this event has exacerbated reduced financial inflows to these countries. The South African rand has depreciated from about 11 rands to the dollar in February of 2015 to about 16.8 rÃ¡nds to the dollar in mid January this year. Even in North America, one Canadian dollar that traded for over 82 cents in April of last year now trades for just about 68 US cents. In Nigeria, there are people who have become very worked up over the parallel market Naira exchange rate. The parallel market rate is not Nigeria's currency exchange rate and the Bureau de change (BDC) outlets only control at best a little over 5% percent of the market. I think the BDCs are very important in meeting small scale foreign exchange requirements and should be seen in that light. Clearly, because of their proliferation and the fact that some people confuse them with the hordes of foreign exchange hawkers walking the streets near major hotels, BDCs have become very popular and notorious at the same time. I think that the CBN will do well to provide seminars to BDCs and help them understand and correctly represent the importance of their role. I believe that the CBN has done a good job in battling to manage a very difficult situation that could have already been catastrophic if it had not been well handled. What the CBN is facing is not just declining oil prices and weak reserves. It is also facing not just the typical currency speculator, but indeed also calculating some unscrupulous individuals who have armed themselves with either vaults of ill gotten Naira or ill acquired dollars. This is a gauntlet the CBN is facing. It is therefore ok in this situation to take bold steps and make even tactical retreats often aimed at burning the fingers of unscrupulous speculators if and when needed. This people are bad for the Naira and can hurt economy if not for the steps the CBN has been taking. Now, the CBN will do well to gauge the markets for the possibility of desirable and efficacious flexibility, but it should never be stampeded into any perilous depreciation when there are wolves lurking around that may drive the parallel market rate even further down the slope. The Nigerian economy is quite resilient and I believe it will survive this ongoing economic malaise. People will have to make adjustments, no doubt. The problem is that many people had gotten used to happy days of fun, merry making and excesses. Now is an opportunity for our communities to hunker down and produce for exports and for the authorities to help in advising on how to adjust to what is now a more favorable export orientation. The time to diversify our economy has come. This is indeed a test for that Nigerian ingenuity. I am Magnus Kpakol and that's my view.
Posted: Jan 26th, 2016 @ 08:45:53 AM