by Tunji Andrews

Indications continue to mount that the nation’s currency, the Naira, will experience further pressure, as the liquidity position continues to worsen, especially as the nation draws close to the 2015 general elections. The nation’s liquidity is set to significantly rise as Asset Management Corporation of Nigeria (AMCON) set to inject N866 billion into the system through repayment of maturing obligations. This, experts have implied that when combined with increased political risks, appetite from foreign investors, is set to fall significantly.

As the pressure continues to mount, the Central Bank of Nigeria, remains forced to continue to defend the value of the Naira which currently sells at N165 to the dollar on the Interbank market. A practice which has continued to deplete the country’s foreign reserves, which have declined 13 percent this year, to $39.3 billion as at October 27 as the CBN sold dollars to prop up the naira, and as oil production missed estimates.

On the other foot, the nation is also being hit significantly by falling global oil prices, which is now at just over $81 per barrel as indications continue to grow that it may fall to $70 per barrel in 2015. With the nation largely depended on proceeds from crude oil sales, many experts have questioned the federal government’s decision to benchmark the 2015 budget at $78 per barrel.

With the growing liquidity levels, even more pressure is expected to hit the economy, as it is likely to increase the inflation rate, which ultimately erodes the purchasing power of Nigerians. Nigeria’s consumer inflation for September eased, to rise by 8.3%, down 0.2 percentage points, from the 8.5% in August.

The injection of AMCON funds topped discussions at the last meeting of the Monetary Policy Committee of the CBN, with members calling for extra means of curtailing the surge in liquidity, as well as calling on the CBN to make the rate at the standing deposit facility, currently at 10 percent, less attractive.

Though, with the impending increase in interest rates in the US on the horizon, Nigeria has continued to remain resilient to tight monetary policy, despite national security challenges and sluggish global recovery. Also, the economy expanded by 6.5 per cent in the second quarter 2014 on the back of solid growth in both the oil and non-oil sectors.

The nations capital market has also not been left out in the decline, with the value of some highly capitalized stocks listed on the Nigerian Stock Exchange (NSE) dipping persistently, with records showing it has depressed market capitalization by N284 billion in the last ten trading days.

Kolapo Olapoju