RateCaptain
  • Home
    • About Us
    • Contact Us
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
No Result
View All Result
Subscribe
  • Home
    • About Us
    • Contact Us
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
No Result
View All Result
RateCaptain
No Result
View All Result
Home Economics

Appreciating Dollar is Having Negative Implications for Nigeria’s Economy

Rate Captain by Rate Captain
August 11, 2022
in Economics
Reading Time: 2 mins read
A A
1
Appreciating Dollar is Having Negative Implications for Nigeria’s Economy
Share on FacebookShare on TwitterShare on WhatsappShare on Telegram

The US dollar has been on the rise since the beginning of the year 2022, appreciating by about 11 percent year-to-date and reaching a par value with the Euro. Notably, major currencies like Euro, Chinese Yuan, and Korean Won have depreciated against the dollar and for developing economies like Nigeria, the effect is even more dampening.

Historic rates show that the US dollar index used to measure the value of the dollar against a basket of six foreign currencies: the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona, which stood at about 94.4USD in January now stands at 104.9990USD as at this writing, data from Bloomberg shows.

AlsoRead

UK Announces £140 Million Initiative to Boost Net Zero Goals in Developing Countries

South Africa Adopts Measures to Exit Global Watchdog’s Grey List

Euro Zone Markets Surge in November as Inflation Eases

The value of the dollar is rising majorly because of the strong demand for the currency. A lot of international trade transactions are carried out using the greenback. Also, major global commodities like crude oil sold across borders are priced in dollars.

For an emerging market economy like Nigeria which is on the transmission line of global shocks, the economic outlook is suggesting a slowdown. The supply chain disruptions caused by the Russia-Ukraine war have led to a surge in the prices of global commodities, darkening the outlook of a major importer like Nigeria. Also, spiraling inflation has led most central banks to raise monetary policy rates, including the U.S.

How this phenomenon is affecting Nigeria

Given that the economic outlook for Nigeria is pointing majorly to a slowdown — IMF recently downgraded Nigeria’s 2023 growth projection in its July 2022 World Economic Outlook (WEO), titled, “Gloomy and More Uncertain” — astute investors will naturally want to move towards safety and may be prompted to look to other stable investment destinations as they fly their capital to safety, increasing the demand for dollar-denominated assets. Pointing to data from the Institute of International Finance, Financial Times reported that emerging markets faced record high withdrawals by foreign investors in the last five months. This suggests an increasing difficulty Nigeria may encounter in trying to attract and retain foreign investors.

Nigeria is an import economy and as the dollar strengthens, import becomes more expensive (in naira terms). Also, considering that foreign exchange is driven by the forces of demand and supply, excess demand for the dollar will cause the dollar to keep strengthening against the naira, thereby putting more pressure on Nigeria’s currency.

Following the above, Nigeria’s Fiscal Space may experience some stress. A stronger dollar requires more naira to import oil and with the petrol subsidy still in place, a large portion of fiscal expenditure will go into subsidizing imported petrol. Nigeria may also experience sovereign debt repayment stress because as the dollar becomes stronger relative to the naira, repayment of the 7-year Eurobond will become more expensive (in naira terms).

Notwithstanding, a strong dollar relative to the naira also means cheaper export and Nigeria can leverage this to increase its foreign exchange earnings. This will directly raise the nation’s foreign exchange reserve and can spill over to improving the value of the naira.

Previous Post

Elon Musk Sells $6.9 Billion Worth of Tesla Shares Amid Chances of a Forced Twitter Deal

Next Post

NDIC says managers are responsible for bank failures

Related News

UK Announces £140 Million Initiative to Boost Net Zero Goals in Developing Countries

UK Announces £140 Million Initiative to Boost Net Zero Goals in Developing Countries

by Akpan Edidong
December 7, 2023
0

In a bid to lead global efforts toward climate action and foster sustainable development, UK's Net Zero Minister, Graham Stuart,...

South Africa Adopts Measures to Exit Global Watchdog’s Grey List

South Africa Adopts Measures to Exit Global Watchdog’s Grey List

by Victoria Attah
December 1, 2023
0

Recent reports indicate that South Africa is intensifying its efforts to exit the Financial Action Task Force (FATF) grey list...

Euro Zone Markets Surge in November as Inflation Eases

Euro Zone Markets Surge in November as Inflation Eases

by Stephen Akudike
November 30, 2023
0

European markets closed higher on Thursday, capping off a robust month with the Stoxx 600 reaching a 10-week high, marking...

IMF Approves $178 Million Loan: A Blueprint for African Economic Challenges

IMF Approves $178 Million Loan: A Blueprint for African Economic Challenges

by Victoria Attah
November 17, 2023
0

The International Monetary Fund (IMF) has given the green light for a $178 million loan to Malawi, a move aimed...

Next Post
NDIC says managers are responsible for bank failures

NDIC says managers are responsible for bank failures

Comments 1

  1. Pingback: Nigeria’s Gross External Reserve Increases by 0.117% - RateCaptain

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

Experts Suggest Now Might Be the Ideal Time for Property Investment in the UK

Experts Suggest Now Might Be the Ideal Time for Property Investment in the UK

December 11, 2023
Flutterwave’s Remittance Surges to $32 Billion with U.S. Licence Expansion

Flutterwave’s Remittance Surges to $32 Billion with U.S. Licence Expansion

December 11, 2023

Popular Story

  • NEC Affirms CBN $3 Billion Loan for Naira Stability

    CBN Addresses Naira Shortage Concerns Amidst Increased Withdrawals

    0 shares
    Share 0 Tweet 0
  • Flutterwave’s Remittance Surges to $32 Billion with U.S. Licence Expansion

    0 shares
    Share 0 Tweet 0
  • Experts Suggest Now Might Be the Ideal Time for Property Investment in the UK

    0 shares
    Share 0 Tweet 0
  • Dangote Refinery to generate $27 Billion Annual Revenue

    0 shares
    Share 0 Tweet 0
  • Nigerian Banks to Demand Tax Clearance Certificate Before Customers Can Buy Dollars, Other Foreign Currencies

    0 shares
    Share 0 Tweet 0
RateCaptain

RateCaptain

We bring you the most accurate in new and market data. Check our landing page for details.

  • Home
  • About Us
  • Privacy Policy
  • Terms & Conditions
  • Disclaimer
  • Cookie Policy
  • Contact Us

Copyright © 2022 RateCaptain - All rights reserved by RateCaptain.

No Result
View All Result
  • Home
    • About Us
    • Contact Us
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates

Copyright © 2022 RateCaptain - All rights reserved by RateCaptain.

RateCaptain
Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage {vendor_count} vendors Read more about these purposes
View preferences
{title} {title} {title}
?>