Possible Risks and Consequences on The Nigerian Exchange Rate
While it is still too soon to predict the strength and potential impacts of this new strain of Covid-19 virus, markets are already estimating its potential dangers and results.
Up until this point, Nigeria has stayed away from the market selloffs with the All-Share Index pulling off a minimal increase at closing last Friday. Notwithstanding, ongoing anxiety in the world business sectors and among rich countries might spell an awful sign for the economy assuming that it continues.
One pressing issue for Nigeria now is its exchange rate because of the virus’s influence on the economy. The exchange rate between the Naira and Dollar at the black market shut at about N560/$1 a lot more vulnerable than the N540/$1 recorded a few weeks earlier as traders pointed to the lack of supply as a potential justification for the dip.
In any case, as the world economies respond negatively to the new variant, there is fear that it could adversely affect the Nigerian economy. Oil costs which have experienced a 13% dip is an illustration of what this could mean for the economy. Nigeria highly depends on petroleum products to support the exchange rate. Should this variation introduce a rise of Covid-19 cases that leads to another round of worldwide lockdown, we could see Nigeria’s export income plunge because of low petroleum prices.
One more danger presented by this new variation is its probable impact on movement to Nigeria during the Christmas season. The period of December has regularly recorded stable trading rates because of a surge of dollars brought in by home-coming Nigerians. Travel limitations can also affect the economy on the long run. If this happens, the demand for dollars which might have been met by home-coming Nigerians may be cut short during the Christmas period. Diaspora Remittances, which Nigeria likewise depends intensely on for forex inflows could likewise be affected.
Worldwide, business sectors are right now scared over the logical impacts of the new found Omicron Covid-19 variant. On Friday, MSCI global stocks benchmark tumbled to its lowest in over a year, petroleum prices tumbled 13%, lowest since September. Countries like the United States, United Kingdom, Israel, Saudi Arabia and South Korea have all given travel restrictions to travelers from South Africa where the virus is thought to have started.
Reports says two Nigerians who showed up in Canada tested positive for omicron variant. This is not a good sign for movement out of Nigeria and more so for the economy.
With time and more information about the omicron variant, more data will be accessible to readily comprehend the virus’s and its effect on the Nigerian economy.