Godwin Emefiele is being lauded in some quarters as the saviour of the Naira through his shrewd and measured action as Governor of Central bank of Nigeria (CBN).
At Naira Insider we beg to differ.
Luck has played a role in the appreciation of the Naira and this will not last forever.
Regular readers will know of our prediction that oil prices will fall over the next 18 months, and potentially much further in the medium term.
Sub $50 per barrel for WTI crude appears to be the new normal and we are predicting sub $45 to be the stable level inside the next 6 months.
As oil prices falls, Emefiele’s ability to pump the market full of dollars will be curtailed and this one singular blunt instrument of CBN’s foreign exchange policy will have been exhausted.
The real sector is still struggling (unless Dangote is in the title of the company).
There is no meaningful access to credit for most companies and the recent rise in the stock market has no foundation in fundamentals other than believing the economic drivel being spouted by uninformed cheerleaders.
Therefore, any movement in the Nigerian economy is still largely driven by the oil price and the operations of International Oil Companies (IOCs).
So Emefiele has been lucky – so far.
Commodities move in cycles – what goes down must come up, and so it has been with oil prices.
However, the game is changing.
The oil market is not operating to the old rules (see other Naira Insider articles) and Emefiele and the Naira look like they might be left high and dry.