An Educator and Professor of Financial Economics at the University of Uyo, Awka Ibom State, Leo Ukpong, has expressed concern that the Naira will deteriorate if Nigeria's External Reserves are drained.
Ukpong, the Dean, Faculty of Business Administration of the Institution, said forex exchange ought to be directed towards economic activities that create values in the domestic economy.
These he accorded will expand values of manufacturing capacities of firms, increasing exports, decline imports, and equipped domestic economy for producing sustainable employment opportunities.
He cautioned that sponsoring the naira for holiday ventures, religious trips, payment of foreign school fees, outward medical tourism, purchase of imported refined oil based commodities, and importation of machine parts, would not help the naira to manage its appreciation.
"Clearly, if the country's dollar reserve is diminished to a basically low level, the Naira will surely get hammered in the market. At the end of the day, naira will go under strong pressure to depreciate. In the course of recent weeks, CBN has effectively raised the value of Naira from around N510/$ to N390/$ (between February 22, 2017 and April 3,2017), a roughly 24.27 per cent appreciation of the Naira against the US dollars. Unmistakably the implication of such direct mediation by CBN on the foreign exchange market is increased supply of US dollars (appreciation of the naira) in the short term," Ukpong noted.
He clarified that the sustainability of this activity relied on upon the rate of forex inflows and outflows.
Taking note that over February and March, Nigeria's foreign exchange reserve expanded from $29.61 billion to 30.30 billion, representing a 2.33 per cent monthly increase, he said the nation may manage such mediation being done by the CBN. "Be that as it may, in light of our long term historical trend, the net effect will be negative on the reserve", he added.
