The Chief Executive Officer of SD & D Capital Management, Gbolade Idakolo, and Prof. Godwin Oyedokun, a don at Lead City University in Ibadan, disclosed this in separate interviews with DAILY POST on Monday.
Idakolo and Oyedokun spoke as the Naira settled at N1,538.50 per dollar on Monday, December 9, 2024, from N1,740 exchanged on November 9, the same year.
On a month-on-month basis, the Naira gained N201.5 and N110 at official and black markets when compared to the N1,740 exchange rate on November 9, 2024.
This is the case despite the Naira depreciating slightly by N3.5 and N30 against the dollar to begin the week on Monday at both FX markets.
This followed the Central Bank of Nigeria’s recent launch of the Electronic Foreign Exchange Matching System (EFEMS) to eliminate distortion and bring transparency to the FX market.
Meanwhile, this is not the first time the Naira has appreciated upon CBN’s policy interventions.
However, the Naira gain has always been short-lived and temporary.
DAILY POST reports that the development had impacted the FX rate used for import duties and cargo clearance, which was at N1645 per dollar Tuesday last week.
Reacting, Idakolo noted that with proper monitoring by CBN, the EFEMS platform is a game changer to the country’s FX market.
According to him, EFEMS had created fear in the parallel market ecosystem, which had reduced unnecessary speculations negatively impacting the strength of the Naira.
He noted that with Naira appreciation, the exchange rate for import duties is bound to reduce, which will in turn impact the prices of imported goods.
“The newly introduced EFEMS platform by CBN for centralised bidding for forex is a game changer because of its transparency and the convergence of all previous bidding options into one platform.
“There is no room for manipulations so far, and all the quotes are shown on the platform for both bidders and sellers.
“This has created fear even in the unofficial forex market (black market) and reduced unnecessary speculations, which has negatively impacted the strength of the Naira.
“The CBN must continue to monitor the market and fulfil its regulatory obligations to all stakeholders.
“The BDCs must align to CBN’s reporting standards, and the banks must not fail to inflict heavy sanctions on erring players.
“The recent drop in the exchange rate for import duties is a step in the right direction, as clearing costs are bound to reduce, which will in turn impact the prices of imported goods.
“Clearing charges is a major component in costing imported goods, and with reduced charges, the prices will also be adjusted accordingly,” he told DAILY POST.
On his part, Oyedokun attributed the recent appreciation to CBN interventions, increased FX inflows, and reduced demand for dollars.
Like Idakolo, Oyedokun said that the strengthening of the Naira against the dollar could indirectly affect the prices of imported goods in Nigeria.
“While the recent drop in the import duties exchange rate may not directly impact the Naira’s exchange rate, it could indirectly affect the prices of imported goods in Nigeria.
“If importers can procure goods at a lower exchange rate, they may pass on these savings to consumers, leading to lower prices for imported goods,” he stated.
He, however, noted that several factors could mitigate this impact of the exchange rate drop on the prices of imported goods.
“Global Supply Chain Disruptions: Ongoing global supply chain issues may offset any benefits from the lower exchange rate.
“Domestic Economic Conditions: Domestic factors such as inflation, interest rates, and government policies can also influence the prices of imported goods.
“Importer Behaviour: Importers may not necessarily pass on the savings to consumers, opting to increase their profit margins instead”, he further told DAILY POST.
According to the Oyedokun, to sustain the Naira appreciation, the CBN needs to continue its efforts to maintain macroeconomic stability, attract foreign investment, and address structural issues.
He added that, “to sustain the Naira’s appreciation, the CBN needs to continue its efforts to maintain macroeconomic stability, attract foreign investment, and promote exports.
“Additionally, addressing structural issues such as corruption, insecurity, and inadequate infrastructure will be crucial.”
“It is important to note that the exchange rate is influenced by various factors, and the Naira’s appreciation may be temporary.
“Continuous monitoring and strategic interventions by the CBN will be necessary to ensure the sustainability of the Naira’s strength,” he stated.
Written By Ogaga Ariemu