Naira depreciates as global inflation begins descent

Local currency, naira has depreciated by 24 per cent Year-to-Date (YtD) in the autonomous foreign exchange (forex) market as global inflation seems to be losing steam, with the United States of America producer inflation slipping 7.4 per cent. 

The National Bureau of Statistics (NBS) is expected to release Nigerian inflation data this week.

Bismarck Rewane, Chief Executive Officer (CEO) of Financial Derivatives Company (FDC) Limited said, Year-to-Date (YtD), the naira has depreciated by over 24 per cent in the autonomous market and this has significantly widened the premium between the official and parallel market rates.

Rewane in its FDC Bi-monthly publication however warned that, there are certain policies and reforms that must be channeled along depreciation path to manage the possible fallout from currency devaluation.

He urged the apex bank to manage inflation and depreciation expectations that come through currency speculation by adopting a monetary tightening policy, by raising monetary policy rate as the CBN has been doing.

He also said, fiscal policies and reforms must be created to increase the country’s competitiveness in the external environment.

Exchange rate unification is a noble goal. However, this could be a hard choice. Indeed, Nigeria’s multiple exchange rate system has become a minefield.

Global inflation seem to be thinning out. 

The U.S. producer price inflation fell again to 7.4 per cent. The news roiled global stock markets because expectations were that it would fall to 7.2 per cent. For now, only the economies of the U.S. and some have seen inflation decline. Analysts say, it could be the beginning of good tidings.