Naira crashing beyond N500 to dollar means 2017 capital budgets may collpase
It was the height of hopelessness weekend as naira crossed the unprecedented N500 to one dollar mark on the parallel market jumping to N506.
But just as several economic and financial pundits remained divided weekend over the outlook for the Naira beginning from now, many said the local currency may depreciate further in the coming months and the scenario may mean serious threat to federal and several states capital expenditure captured in the 2017 budget.
Analysts say both federal and states budgets that escaped the hobbling of forex, may not escape the parallel attacks of hyper inflation as rising forex differentials between official rate and black market have strong hands in determining inflationary trend which may crash budgetary allocations to capital expenditures at the long run.
Already, leading financial analyst, Bismarck Rewane, the chief executive officer of Lagos-based research firm, Financial Derivatives Company weekend argued that the naira might fall to around 520/dollar in coming weeks if right policies and recovery efforts are not timely made.
The local currency also weakened to N617 and N531 against the Pound and Euro respectively, down from the N615 and N530 recorded weekend.
The official market had remained at 305.25/dollar since last August, but accessing it has been a tug of war for both manufacturers and other importers, leading to excruciating jump in prices of foreign goods in the local market.
Explaining how the rising exchange differentials will affect 2017 budget, Dr. Ken Igboanugo, a finance expert told Business Hilights in a telephone interview Sunday evening that “many of the components of capital projects that will be implemented by states that are captured in 2017 budget will be bought abroad or paid for in dollars. If states fail to access forex via the CBN, it means that they will go for parallel market and the payment will mess up the earmarked budget, thus frustrating the scheme at the end.”
Continuing, he said “With this development, many of the projects may become abandoned at the end of the day because for states to deliver them, it means that extra budgetary allocation or supplementary budget will be presented. Again, this will be possible based on the level of income generation of such states.
