The Naira tumbled to a recent report low towards the greenback this week, buying and selling at N734 to the greenback on the unofficial market from N715 ultimately week’s shut.
Nigeria shouldn’t be alone on this free fall, the Ghanaian cedi and the Egyptian pound sank to new lows, with the South African rand persevering with on its free fall.
The sharp decline got here even because the Central Financial institution of Nigeria (CBN) hiked charges by 150 foundation factors (bps) to fifteen.5 per cent because it seeks to fight excessive inflation, which the financial institution says has been exacerbated by worsening insecurity, damaged essential infrastructure and excessive import prices on objects comparable to wheat.
Destruction of farmland and livestock as a result of current flooding can also be threatening shortages of agricultural produce. Within the brief time period, we count on the Naira to proceed its depreciation towards the greenback amid elevated demand for FX within the parallel market.
It will likely be recalled that naira on Tuesday fell to a report low of N725 per greenback on the parallel market following elevated demand for the buck amid a provide scarcity.
Analysts thought the destructive pattern would reverse after the apex financial institution hiked charges, however the reverse was the case as at on Thursday.
Additionally, the cedi dived to a brand new report low this week, buying and selling at 10.38 from 10.11 ultimately week’s shut. Ghana stated it had began discussions with the IMF this week because it seeks to safe a $3 billion three-year mortgage bundle to stabilise its financial system, provided that surging borrowing prices have shut the nation out of worldwide capital markets.
The IMF is predicted to conclude an 11-day mission to the nation on the finish of subsequent week. Market watchers predict that Ghana might want to restructure its debt to unlock any IMF financing. Fitch Rankings minimize Ghana’s credit standing one notch to CC, signaling a ‘default of some type seems possible’. Towards that backdrop, we count on the cedi to proceed weakening past the ten.50 stage within the close to time period.
The Egyptian pound hit a report low 19.53 towards the greenback this week, earlier than recovering to commerce at 19.48—marginally stronger than final week’s shut of 19.49. Greenback shortage is ongoing within the nation, with Egypt’s web international alternate reserves standing at $33 billion in August, the bottom stage since 2017.