It was a week defined by fluctuating bond yields, easing inflation fears, monetary bazookas, and US stimulus hopes.
For Nigeria, the spotlight was on the ‘Naira 4 Dollar’ scheme introduced by the Central Bank of Nigeria (CBN) in a bid to boost flows amid currency shortages.
The CBN plans to pay recipients N5 for every $1 received as remittance inflow.
Over the past few months, Africa’s largest economy has faced a persistent dollar shortage which has weighed heavily on the local currency and stoked inflationary pressures.
The question is whether this two-month scheme will have the desired effects?
Although the country remains on a fragile road to economic recovery, a series of policy u-turns over the past few weeks has fostered a sense of uncertainty; from allowing fuel subsidies to rise back up to the recent naira devaluation.
For an extended period, the IMF and other major institutions have advised Nigeria to abolish its multiple exchange rates.
Indeed, higher oil prices are a welcome development for the economy but without the correct structural reforms, the country remains exposed to external risks.
Foreign exchange reserves have fallen to $35.23 billion in February from $36.4 billion in January.
In regards to inflows from international investors through the Nafex window, this totaled $117.5 million for the first two months of 2021 compared to the whopping $3.5 billion for the same period in 2020.
As the dollar scarcity rages on, the black-market flourishes with the naira depreciating to 485 per dollar compared to the official N410.
The year 2020 was defined by extraordinary levels of uncertainty, unprecedented events, and chaos for most economies. This year could be one of renewed hope and optimism as COVID-19 vaccine rollouts and improving global growth bring back some normality.
The question is whether Nigeria will be part of the winners that evolve from last year’s chaos or joins the group who are unable to shake off the nasty hangover and negative impacts from 2020.