By Stanley Opara

Experts have said that Nigerians should prepare for further decline in the value of the naira as a result of politicians’ preparations for the April elections.

The experts said there would be increased spending by politicians, which would put more pressure on the naira.

The Financial Secretary, Chartered Institute of Bankers of Nigeria, (Lagos branch) Mr. Gbenga Olutimehin, who spoke to our correspondent on the telephone on Saturday, said this would strengthen the dollar against the naira.

According to him, the increased circulation of funds in the economy will also trigger inflation.

Olutimehin, however, explained that politicians were buying campaign gadgets and would continue to spend money on other things like the printing of posters, distribution of gifts items, among others, which would eventually saturate the financial system with physical cash.

“There will be more money chasing few goods. More politicians will be willing to also sell their property to raise cash,” he said. According to him, these will eventually have a negative multiplier effect on the value of the naira.

“Nigerian politicians are very desperate. As a result, this will increase their borrowing from the formal and informal financial markets. A lot of passive investments will be converted to active funds,” he added.

Analysts at the Financial Derivatives Company Limited have also said that the level of spending in the run-up to the April polls may have stoked inflationary pressures during the period under review.

“The consensus is that inflationary pressure is expected to remain elevated during the year at between 12.5 per cent and 14 per cent. Some of the obvious inflationary threats expected to crystallise in the coming months include political spending ahead of the April elections,” the FDC said in its latest report.

The naira eased to its weakest level against the United States dollar for two and a half months on Thursday last week.

This development, according to market sources, was as a result of political uncertainty ahead of the April elections.

Some dealers had also said the situation had led to strong foreign exchange demand by some politicians.

The International Monetary Fund had said that the CBN might need to increase benchmark interest rates further and weaken the naira to curb inflation, following the increase in public spending.

Source: Punch