In January 2019, analysts at Afrinvest predicted that the local currency may hit N400 per dollar towards the end of 2019 when investors retreat from emerging and frontier markets and the appointment of a new Central Bank of Nigeria (CBN) governor mid-2019as well as the direction of oil production and prices at the global market.
But this prediction was cut short after President Muhammadu Buhari decided to retain Godwin Emefiele as the governor of the Central Bank of Nigeria (CBN) for another five-year term.
In its recent report titled: "Nigeria’s House of Cards: Will Foreign Exchange Policy be Altered?," Afrinvest said it believed that Godwin Emefiele-led CBN would keep favouring the fixed exchange rate and the current misalignment between the official rate of N305.00/US$1.00 and market-led rates of N360/$1.
The analysts also predicted relatively strong external reserves in short term but said, “the boom and bust cycle of the commodity markets is inevitable, making the current stability of the currency untenable over the medium to long-term.”
They called for more flexible management of exchange rate to ensure adequate response to economic shocks, which in turn, prevents sharp exchange rate adjustments and sustains foreign investment, forex liquidity and growth.
“Evidence from previous commodity shocks shows that without a flexible exchange rate system, the chance of an economic recession or weak growth and banking system weakness is high,” they said.
Godwin Emefiele-led CBN poses to keep defending the naira with the weekly injection of dollars to support market liquidity
The Central Bank Of Nigeria (CBN) had said it is committed to sustain the high level of stability in the forex market and continually ease access to the currency by those requiring it for genuine activities.
Last year, Isaac Okorafor, the Director, Corporate Communications Department at the CBN, said the bank will inject funds into the market, whenever and wherever necessary, in order to maintain market stability as well as sustain the financial system.