Experts raise fears over naira

The weakening global economic outlook and planned deregulation of the oil and gas sector by the Federal Government have been described as major risks to the value of naira.This view was expressed by the Head, Market Risks, Greenwich Trust Limited, Babatunde Obaniyi, in a paper titled: Recent developments in the foreign exchange market, presented at the Financial Correspondents Association of Nigeria (FICAN) bi-monthly discourse, held in Lagos last week.According to Obaniyi, Central Bank of Nigeria (CBN)'s current policy of defending the naira with the foreign reserve would largely depend on crude oil prices at the international market, adding that the present global economic outlook suggested a downside risk to the oil prices.'The weakening global economic outlook implies there is downside risk to the oil price, so there is a strong likelihood that foreign reserves are likely to remain flat if not lower till the end of 2011 and the scope for a strong recovery in reserves in 2012 is now smaller. The market is also expected to continue to factor in the crude oil prices which determine the level of external reserves which in turn the official market.On effort to stabilise the forex market, Obaniyi explained that the CBN in early July this year, raised dollar sale to Bureau de Change (BDC) operators by banks from $250,000 per week to $500,000 then to $1million per week, adding that giving the exchange rate gap which was over 10 per cent created in the market following the restrictions and the possibility for round tripping, the CBN revised the restriction and yet again lifted the restriction of the $1million maximum limit that authorised dealers to sell to BDC operators from autonomous sources.
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