Lira crisis drifting Turkey to recession, crisis may put Nigerian Naira at risk, Experts raise alarm

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Some Turkish lira notes.

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The Turkish lira crisis has continued to spiral out of control, after rating agencies predicted a recession within a year – prompting European allies to look at giving support to Recap Tayyip Erdogan.

Experts say this development, if it persists, may put the Nigerian Naira at risk.

Ratings Agency Standard & Poor said Monday that the Turkish lira crisis will push the country into a recession in less than a year, if something is not done to end it.

The crisis has already put emerging and European markets, including Nigeria’s Naira on alert for the past two weeks, after US President Donald Trump launched sanctions against the country.

Though the Turkish president has refused to give in and instead accused America of launching an “attempted economic coup”, the country’s economy has continued to descend into turmoil with the lira falling by 40 percent against the dollar since the start of the year.

Based on the new US tariff on Turkey, Aluminum from Turkey entering USA market will now pay 20 percent duty and steel 50 percent. Turkey responded by raising the tariffs on alcoholic beverages by 140 percent, on tobacco by 60 percent, and on passenger cars by 120 percent. Tariffs were also increased on other US goods, including cosmetics, rice and coal.

But financial experts in Nigeria said the ripple effects might cascade down to African economies, especially as most of them have strong trade ties with the two warring countries.

This is even as the trade volume between Nigeria and Turkey is now about $1.2 billion, according to a fact-sheet obtained by a national newspaper.

Analysts told Daily Trust that if the trade tariffs against Turkey by the USA impact Turkish manufacturers, and it should impact negatively, the prices of goods coming in from Turkey to Nigeria will skyrocket.

An economist, Mr. David Akwu and a lecturer at the University of Nigeria (UNN) said Turkey being a significant trading partner to Nigeria, a rise in prices of goods will mean Nigerians will import goods from turkey at higher prices; “that also presupposes that there would be more demand for forex which might impact the value of the naira if Nigeria doesn’t have enough forex to meet the demands,” he added.

He also said Turkey might want to look for new markets for its steel and Nigeria may be a destination following the huge infrastructure deficit in, and the steel needs of Nigeria.

He said if this happens, there might be significant demand of forex for steel import by Nigerians and these might impact Nigeria’s reserve if government grants the forex to the steel importers.

Also speaking on the issue, Mr. Rislanudeen Mohammed, the former acting managing director, Unity Bank of Nigeria, said:  “Trade wars across the globe are largely between US and its traditional allies in Europe and Turkey.

“China is also in trade war with US. It was largely about underlying national interest.

“Nigerian economy is not operating in isolation of other economies in the world. Happenings around the globe can impact on us, negatively or positively,” he noted.

On impact of the trade war on Nigeria’s currency, he said it might be experienced from the USA angle.

He said: “Recall that when President Buhari visited US,  issue of lopsided terms of trade in favour of Nigeria was raised. Going forward, Americans might ask for right of American businesses to export to Nigeria Agricultural products for example.”

“At a time when we are heading towards election, there is natural expectation of instability in foreign exchange receipts especially FPIs or hot money. Already foreign exchange had negative impact of almost $0.5 billion to $47.33 billion.”

According to him, “even though we have relative stability on both price and output of crude oil, susceptibility to destabilization is not impossible with trade wars impacting on our major trade partners like China and Europe.”

To mitigate the shocks he said, “we need to promote self-sustainable growth to insulate ourselves from any negative shock of such trade wars and also protect our existing international trade relations especially our crude oil exports, being our major foreign exchange source.”


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