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FDC Predicts further depreciation of the Naira

Under the current market regulatory framework, the naira is bound to remain under pressure and unstable until the market is allowed to operate freely and efficiently.

This was disclosed by a group of analysts at Financial Derivatives Company (FDC) Limited in their outlook for the naira in 2017.

According to Bismarck Rewane, FDC’s Chief Executive Officer, the adoption of multiple exchange rates which involves the use of different exchange rates for different transactions has a lot of consequences for the local currency.

In its monthly economic report with the theme, “2017 Periscope: Year of Hope, Anticipation and Aspiration,” the FDC crew said multiple exchange rates usually form an important component of an interventionist or state controlled economic development model.

The consequences according to the analysts include: pervasive state intervention in the economy; financial repression; restrictive trade regimes and closed capital accounts.

For Nigeria to escape from this forex trap, the authorities need to understand that there is a need for a properly functioning market said FDC analysts.

“The CBN will need to eliminate or phase out regulations that stifle market activity; create a sense of two-way risk in the market; reduce its market making role and stop indirect or overt rate determination; increase market information on the sources and uses of foreign exchange; there must be liquidity, transparency and openness; the CBN as a regulator must be firm in dealing with market infractions,” Rewane said.

Source: Tribune

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