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Wednesday, 9 November 2016

Donald Trump Victory - What does this mean for the naira?

Following Donald Trump's victory at the Polls against Hillary Clinton, this could have strong economic implication.

America voted, and to the shock of most of the rest of the world, Donald Trump is the President-Elect of the United States of America. While he won't be sworn in until January 20, there is a question lingering;

What does this mean for our Naira?

We already know that US Stocks have plunged, and the stocks of many countries will follow suit.
When the US. economy sneezes, most of the world catches a cold. The main factor causing this plunge is one thing: volatility. 
Volatility means instability, and this, in turn, means low confidence in investment. To paint a clearer picture, imagine you're trying to buy a car.  If you had uncertainties about the efficiency of the car, you'd probably give it a second thought.
Your confidence in making that purchase or investment will drop. This is why the stocks plunged because investor confidence dropped. Another factor is that Hillary is generally regarded as a pro-establishment candidate, while Trump isn't. This will also affect the dollar adversely, and possibly see the further gain in the naira.

But can we trust the CBN to take advantage?

Not really. The CBN has a recent history of weird policies, and it doesn't look like this is going to change.
It will be remembered that UK stocks suffered the same thing following the Brexit referendum, but not much changed for the naira.
In the long run, the stocks will stabilise, and currencies will strengthen, and who knows, the global economy might just do well over the next few years.
We'll just have to clean up our own mess by ourselves nonetheless.

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