The foreign exchange markets in Nigeria are in over drive again but there is no good reason why any one should worry about the Naira if trends that date back over a decade are to be taken seriously.
The Naira has lost about four per cent against the dollar in the last two weeks as oil prices take a tumble and FX traders panic.
But there is no good reason for any panic at this time.
Firstly Nigeria’s external reserves have increased by 0.75% after an extended period of depletion.
Secondly the price of cocoa is at a high of $2,145 per tonne and this is the season for the main crop harvest and inflows of approximately $429 million are expected.
READ ALSO: Three reasons why Nigeria should not expect an oil rally soon
Thirdly history suggests that December is the month when the naira usually gets stronger in the forex market.
The visiting friends and relatives of Nigerians coming home for Christmas control at least 5% of Nigeria Diaspora remittances ($22bn), meaning an inflow of approximately $1.1bn should come in a six week period according leading economist Bismarck Rewane.
Fourthly while the price of oil has lost 30% from its high in October it is still trading at $59pb whilst Nigeria’s production is up at a healthy level of 1.8mbpd.
Fifthly, according to Rewane, the misplaced anxiety over the local currencie comes down to the temporary political risk premium which is accentuating investor jitters in the build up to an election many now believe will be a close contest.
Bismarck also alluded to issues of exchange rate misalignment and the associated market conditions that breed multiple exchange rates, incentivize speculative activity.
