Jan 6 (Lagos) - The Naira weakened to 493 to 1 US Dollar in the parallel market today even after the foreign reserves rose to US 26.2 billion according to data from CBN.
The rise in foreign reserves is a good sign for the economy but it has to translate into visible gain in Naira value which is not happening.
We need a much steeper rise in foreign reserves to above $ 30 billion mark to expect tangible improvements in the economy. For the foreign reserves to rise above the 30 billion mark crude oil prices need to stabilize at current levels or move higher and the FG need to make sure Nigeria is able to produce crude oil from Niger Delta for export.
Deregulation in the petroleum sector means higher crude oil prices will lead to higher petrol price at the pump in Nigeria. Some analysts are expecting petrol prices to go beyond N 200 per litre in Nigeria. If that happens, we can expect labor strikes, fuel shortages and stagnant economic environment in 2017. Let us hope it does not happen and FG realizes that petrol prices cannot be increased so soon after the last increase.
Also the CBN need to adjust its lending rate to more realistic level with inflation in the region of 19% and T-Bill yields moving higher.
Unless the CBN acts fast, we will continue to remain the current situation of recession, lack of risk taking and general decline in the GDP of Nigeria.
reporting for easykobo.com on Friday, Jan 6 2016 from Lagos, Nigeria
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