The future appears bright for the country with crude oil quarterly revenue poised to reach $14 billion, whilst trade balance to berth on the positive side after a long period of repeated trade deficits.
In addition, contrary to expectations of some cynic that the naira would plummet after the Central Bank of Nigeria (CBN)’s decision to stop funding the Bureau De Change (BDCs), the naira made a U-turn and has appreciated instead.
“The bright spot in the chequered picture is that oil prices are back up again at an average of $74pb in July and OPEC has increased Nigeria’s quota to 1.8mbpd. This could lift the quarterly dollar oil revenue towards $14 billion per quarter from an average of $11 hillion in 2020”, said Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives Company (FDC)..
He said, Nigeria’s terms of trade, which measures the change in prices of its exports relative to the prices of its imports has improved from 23.2 in 2020 to 30 in 2021. This means that with the balance of trade now becoming positive ($1.2bn) and an exchange rate determining mechanism aimed at attaining global competitiveness, there is a chance that Nigeria might be moving gradually and closer towards fair value of the naira on a more sustainable basis. The naira has gained 3.24% since it fell to N525/$ last week.
“Most pessimists were of the view that the naira was likely to plunge to N700/$ after the BDCs were stopped from buying dollars from the CBN. We continue to hold the view that the naira will continue to appreciate towards fair value (N470-N490/$) in the parallel market as long as the CBN increases forex supply. However, corporates remain nervous as to policy direction and uncertainty remains”, Rewane said in its latest FDCThink Tank edition..