Liberalisation could cement Nigeria's naira gains

Significance

Currency developments have proved surprisingly positive since the introduction of NAFEX in April, with a strong resurgence in foreign equity investments and increased central bank dollar sales driving naira appreciation in the short term.

Impacts

• Naira appreciation could be sustained by a buoyant recovery in the non-oil sector and diversification reforms.
• Fiscal deficits that overshot year-end targets by 14% in June will deter foreign bond investors.
• Oil sector volatility will weigh on the naira; militant attacks shut-in 150,000 barrels per day in July.
• Full exchange rate liberalisation could depend on the successful commission of the Dangote oil refinery in 2019.