There are two events that have occurred in the past one month in Nigeria that have the potential to impact the exchange rate.
1. The Launching of Dangote Refinery:
It is believed that the facility could produce adequate refined fuel ⛽ for local consumption. Asides that, the excess production could be exported. Export means demand for the NGN and appreciation of the currency.
The Dangote refinery is a business owned refinery that could and could not have major impact except Nigerian government decides to play there cards well. The refinery if at all could refined our crude locally( there are situations were local made products aren’t cost effective) then it would save the government the landing cost payed to bring back the PMS back. Also the subsidy could be payed in crude and to the refinery thereby reducing the amount of crude the refinery gives it out to marketers. The government then need to enact serious rules on the price regulation because currently the Nigeria PMS price is not regulated. As for the export it definitely depends on the exchange rate used by the company. If the company uses the dollars which is the international exchange currency then an impact on the Naira won’t be felt because the importing countries won’t see the need to make use of it.
How do you think these two events could impact the strength of NGN against the USD? Will you buy and save USDTinstead of saving in NGN?
The Dollar rate unification will definitely help coupled with having to open the boarder and the government prioritizing local made products. These products could be exported out using the Naira as the exchange rate.
Concerning hoarding in any of the dollar or Naira, I would say Dollar is more is preferable but I wouldn’t have all my savings or major savings in both. The Dollar itself is under strong pressure for devaluation as more and more countries do not longer make it a priority international exchange currency again. Also the use of it as a reserve currency has decreased as many countries look into other assets like Gold which is a store of value. Even the Nigerian government Should start reducing its much dependence on it, because according to reports they have close 60% of their reserve in the dollar currency. Which will be a great disaster should the currency face any challenge in the coming near future