Oct 8 (Lagos) - The sale of crude oil to Dangote refinery in Naira has begun and is causing excitement among analysts as some of them expect this to boost the Country's foreign reserves.
This is indeed exciting because if we take a look at the Naira to Dollar exchange rate any step is a positive at this point as we are approaching 1700 levels to 1 Dollar. We are almost at the stage we were in March 2024 where law enforcement were seen shooting outside some BDC offices in Abuja.
Shortly thereafter we witnessed appreciation in Naira to 1000 levels and the subsequent crash. So will we see a resurgence in the Naira this time again?
CBN has taken a lot of steps to help Naira since then including raising interest rates, digitizing the forex bidding process, allowing sale of forex to BDC's and clearing the backlog. However Naira continues to linger at these levels and it is a real worry for everyone doing business in the Country because the way it is going we are soon going to reach 2000 levels.
We would expect them to save the Naira with this Naira to Crude oil sales to the Dangote Refinery but is it really feasible. Previously the government would have sold crude for Dollars and then purchased PMS with Dollars. Now they will sell in Naira and purchase PMS in Naira. So it is net even situation and hard to see where the gains would come from unless there is reduction in the amount of PMS purchased, then the FG would gain something. Overall this is great for the Refinery and does take some pressure off the Dollar demand in theory.
This is a welcome development as it makes Naira more useful and US Dollar a bit less. Let us hope we some Naira appreciation because the current situation is detrimental to economy and adds fuel to inflation fire that is raging all over the Country.
reporting for easykobo.com on Tuesday, Oct 8 2024 from Lagos, Nigeria