An economic research analyst has bemoaned the inability of the Central Bank of Nigeria to contain the free fall of the Naira in the currency market.

Lukman Otunuga, a research analyst at Forex Time (FXTM) said that the economic disequilibrium has left naira’s value to be determined by the ‘black market’ foreign exchange market.

Otunuga who spoke during an exclusive with Nigeria CommunicationsWeek said that the CBN must realize that foreign investors and indeed the world are “watching Nigeria’s economy like movie series”.

A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets. Lukman provides in-depth analysis on the global currency and commodity markets and is often quoted by leading international media outlets such as: MarketWatch, CNBC, NASDAQ, Reuters, AFP, The Guardian and Yahoo.

Prior to joining FXTM, Lukman spent two years as a research analyst with international currency broker FXCM, where he focused on technical and fundamental analysis of the global currency, commodity and stock markets. Lukman was also responsible for leading educational seminars for international and local high net worth individuals, and has published a series of educational articles on forex trading with City A.M.

Lukman holds a BSc (hons) degree in Economics from the University of Essex, UK and an MSc in Finance from London School of Business and Finance, where he studied corporate finance, mergers & acquisitions and the role of international financial institutions. He spoke to peter oluka. Excerpt.

Predictions About Nigeria’s Economy 2017
“First, the world is actually watching Nigeria’s economy and issues like series. Right now, everybody knows that Nigeria is under pressure. Last year we spoke about the economy and I said diversification will be the key. This year the focus is on getting the economy out of recession. So, the emphasis is now on policies. I feel that in the next six months Nigeria will remain at risk because of obvious factors like investments from China. When China sneezes Nigeria catches cold. Donald Trump’s policies will have impact in Nigeria. I read in the newspaper that he is already considering limiting the number of visa issuance to the country (Nigeria).

“These are external factors. Internally, the Central Bank of Nigeria (CBN) will be under pressure. They have actually kept the monitory policy interest rate at 14%. The truth is they are under pressure which is the reason they are under conscious approach. Even though the International Monetary Fund (IMF) and the World Bank gave Nigeria’s economy a positive outlook for the year 2017; to get out of recession, I don’t think it will be that easy.

New Approaches CBN Should Adopt
“On the physical side of the economy there is no clear direction. Everybody is waiting to see what will happen. This speaks on the fact the World Development Bank (WDB) has kept Nigeria from the $1billion loan, because there is no transparency or clear direction on how it will be utilized. But on monetary side, I think Nigeria may be forced to devalue the Nigeria.

“The official rate is about N305 to $1, but they may take it to N380 to close the gap with the black market.

Manufacturers, Industries Should Be Given Priority In Forex Disbursement
“It is very interest to bring in the manufacturing sector in here, because the CBN has allocated about 60% of the forex to them as they represent about 10% of the GDP. Nigeria’s problem is cost caused inflation. Let me break it down. We have a situation where manufacturers imports raw materials but do not have access to the official forex rate. Of course, they need profit, so they push the cost to the consumers. It keeps circulating and should be checkmate to avoid hyper-inflation.

Oil and Gas
“Nigeria plans to diversity on long term, but in the short term it is still about oil. And OPEC gave Nigeria a very good trust to make comeback if she (Nigeria) can still produce about 2.2million barrels per day. But if you consider the militancy in the Niger-Delta, last December, the country was producing 1.4million barrels per day. So, we have a situation here that even as OPEC is magnanimous to the country by taking a supply cut, still Nigeria may not be able to take the advantage. I don’t even know how Nigeria will get to 2million barrels per day from the present output should the militancy continues.

Trump’s Policies, China and Nigeria
“The main thrust of Donald Trump’s government is protectionism- the Americans first, which is de-globalisation. So, we have a situation where all the countries that had access to United States will lose such opportunities. They need to approach the alternative, which is China, the second strongest economy in the world. How will it impact Africa? Nigeria? Of course, if you look at China it is giving and getting a lot from Nigeria.

“So, when China gains it is to the advantage of Nigeria. Trump has already abolished the TPP; which is just a way to remove trade from China. This could be a situation where Africa comes back (up); where other nations measure up by taking critical decisions.

Leveraging Nigeria- China Trade Agreement on Yuan
“I still think that agreement is valid, although there are concerns that China is facing pressures, but we have to keep in mind that what Nigeria needs now is not to make the dollar king. Dollar is not the legal tender in this country but a typical Nigerian would prefer to have dollar to Naira; that speaks volume. Therefore, we do a lot of businesses with China and it will do us good to dust up that agreement.

Why FDI Is Eluding Nigeria
“First, let’s refer to how Fietch downgraded Nigeria’s long term rating to negatives. Initially, that will discourage foreign investors. I understand that in March Nigeria is trying to get the $1B Euro-bond. This news of Fietch turning Nigeria’s rating down will affect the Euro-bond. First, Nigeria should establish foreign exchange rate stability. No body wants to invest in a speculative environment.

Bridging CBN and Black Market Forex Rates: How Possible?
“The CBN needs to understand the bitter truth: value of the Naira is determined by the (forex) black market. Some people has said that the fundamentals behind the black market do not make sense, but it is simply the principle of demand and supply that makes the market what it is. Now, we are talking about N500 to $1; that is the true value of the Naira.

The quicker the CBN understands the truth and actually allow the Naira have a free flow; otherwise inflation will continue to skyrocket. If they do that, it is going to be a short term pain but will be beneficial at the end.

Late Passage of the Appropriation Bill (Budget) And Impact On Economy
“For certainty this has huge impact on the economy. For instance the 2016 budget was released about five months later. It causes uncertainties in the economy, because it shows there is no transparency. Uncertainty will also cause people to offload the Naira.

Economic Diversification
“The more I look at agriculture I see that even though God Blessed Nigeria with oil, but it has been a curse on the economy. This wasn’t the situation in the 60s’ and 70s’. So, we really need to embrace agriculture and develop the infrastructure. Power is very much in demand. No economy performs better than it is doing in power generation. We need to fix the roads and other amenities, having in mind that technology is the way to go too.

“Take a leaf from the United States where Dollar has appreciated so much just because the new administration sad they are going to be focusing on the physical side- massive infrastructure development. This is what Nigeria needs to do.