A strong naira is not synonymous with a strong economy. The naira has gained 25% since February 2017 on the back of 12 interventions of a total of $2.27bn. The questions on the lips of Nigerians are:
-Is this for real?!
-Is it sustainable?!
-And what next?!
Simple economics tells us that, without a change in the market structure, gains in the exchange rate are likely to be temporary and transient. Surges in supply with no policy shift will only entrench multiple exchange rates and encourage arbitrage.
The CBN is increasing Forex supply with good intentions, but as they say “the road to hell is paved with good intentions”. Whilst Nigerians ponder on how much the naira will gain, we see the CBN trying to catch a falling knife without sustaining any wounds.
In this edition of the LBS Breakfast Club, Bismarck Rewane and the FDC Think Tank explains the economics of exchange rates and the impact of a strong naira on sectors of the economy and your business.
Enjoy your read…