‘Vulnerable’ naira falls ahead of NBS ‘official recession report’

Naira opened weak on Monday as Nigeria awaits the official gross domestic product (GDP) report from the National Bureau of Statistics (NBS), which will declare Nigeria’s recession position.

The NBS is billed to release the official report on August 31,and it is expected to confirm how deeply Nigeria has slid into recession, following a 0.36 percent slip in the first quarter of 2016.

The naira opened at 413 to the dollar at the parallel market, while the interbank market rate spiked from its closing 315.25 on Friday to 319.25 on Monday morning.

The British pound and the Euro went for N530 and N455 on Monday at the parallel market.

Lukman Otunuga, FXTM research analyst, said the Nigerian government showed resilience by approving the “three-year budget plan despite concerns remaining elevated over slowing growth which weighed heavily on sentiment”.

“The Federal Executive Council (FEC) has approved the medium-term expenditure framework (MTEF) and Fiscal strategic paper (FSP) for 2017-2019, which could be seen as a blueprint on how the nation plans to recover in this period of uncertainty,” Otunuga said.

“With low oil prices seriously punishing Nigeria, the Federal Government may have been forced to adopt a conservative approach in the three-year project.

“The Federal Government has fixed average prices of oil per barrel at $42.5 for 2017 with 2.2 million barrels of crude created daily. Growth rate was also targeted to 3% in 2017 and 4.26% in 2018 as the nation embarked on the journey to diversification.”

Otunuga added that the NBS GDP report may heavily influence investors, and render the naira vulnerable.

“While some optimism could be felt from the approval of the three-year budget, investors may heavily focus on the second quarter GDP report, which will be released on the 31st of August and which may offer clarity on how the economy is faring.

“Fears of a recession still linger and a second quarter GDP which fails to meet expectations could dent sentiment further consequently leaving the Naira vulnerable to heavy losses.”