The naira may be affected by the ongoing financial turmoil which has seen the Turkish lira lose 40% of its value.
The lira has been in turmoil over worries about the country’s high debt levels, rising inflation, President Tayyip Erdogan’s refusal to consent to an increase in interest rates and tension between the European country and the US.
Erdogan has described his country’s economic problems as an attack; accusing US President Donald Trump of carrying out an operation against Turkey.
He also defended the country’s debt levels saying cheap credit is the way to fuel the economy. Euronews reports that a construction boom in the country has left banks and companies exposed.
Commenting on the risk to the naira, Jameel Ahmad, FTXM’s global head of currency strategy and market research, said investor appetite to emerging-market assets might be reduced.
“Global markets throughout this week are likely to remain dictated by external pressures, with this most likely being encouraged by the intense risks around the Turkish lira crisis,” he said.
“The threat for the Nigerian naira will be that investors continue to remain ‘risk off’ during this period, with a strict reduction in trader appetite towards emerging-market assets.
“This means that emerging market currencies like the naira will be off the table for investors and we can expect for the naira to take guidance from the Lira crisis.
“If the lira continues to worry global investors the naira, like other emerging market currencies, will suffer from the risk-off environment.”
Already, indices on Nigerian Stock Exchange hves been on a downward trend. The South African rand also hit a two-year low on Monday.