Investors in Nigeria who were hoping that the final weeks of trading before Christmas would conclude on a quiet note received a surprise on Wednesday following the firmly hawkish FOMC meeting which sent the Dollar to 14 year highs. A rising Dollar amid the prospects of higher rates from the United States may enforce further downside pressures on the fragile Nigerian economy.
Although the Dollar is not the legal tender in Nigeria, the demand is extremely high and with the nation not generating enough foreign exchange to quench the local consumption, demand for the Greenback inadvertently drives the value of the local Naira. Although it is widely known that the nation is currently embarking on a quest to transitioning away from oil reliance by diversifying, a resurgent Dollar that weakens the Naira could impact economic recovery and prompt the Central Bank of Nigeria to take further action in the New Year.
Lukmon, FXTM
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