At the ongoing Global Trade Review West Africa, experts delved into the reasons behind the absence of price reductions despite the recent strengthening of the naira in the FX market.
Yinka Ogunnubi, President of the Association of Corporate Treasurers of Nigeria (ACTN), highlighted concerns about the rapid appreciation of the naira, emphasizing its negative impact on long-term planning. He worries that the current volatility could lead to significant FX losses for many companies in Q1.
Ogunnubi emphasized the importance of price stability, urging consistency in the naira’s value over an extended period. He explained that businesses hesitate to adjust their pricing due to uncertainty about the sustainability of the naira’s appreciation. Only time will tell if the current trend is viable for the long term.
Addressing the issue, Ogunnubi called on the Central Bank of Nigeria (CBN) to provide clarity on the naira’s stability in the FX market. This would thereby instill confidence among investors and producers in effective long-term planning, which could eventually lead to price reductions.
Mopejuola Faloye, Group Treasury Manager at Oando, echoed the sentiment, emphasizing the significance of the CBN’s actions and regulations in ensuring stability during the waiting period. Faloye stressed the importance of measures taken by the CBN over the next six months to inspire confidence among investors and businesses.
Background Context
In recent weeks, the naira has experienced notable gains in the FX market, strengthening from nearly N1700/$ to approximately N1250/$ on the official market. These gains are attributed to various actions by the CBN, including increasing the Monetary Policy Rate (MPR), selling USD to Bureau De Change (BDCs) at reduced rates, and auctioning Treasury Bills and Open Market Operations (OMO) bills at high yields.
Despite the CBN’s efforts to curb inflation through measures like the MPR hike, inflation rates have continued to rise, reaching 33.2% in March 2024.
