Analysts forecast Naira devaluation to N400 per US Dollar

Isola Moses | ConsumerConnect

Despite the Central Bank of Nigeria’s (CBN) current insistence that there is no devaluation of the Naira, the country’s currency soon, analysts have tipped the Naira to depreciate by between 10 and 20 percent in 2021, as impact of the falling crude oil prices and foreign exchange reserves persists.

ConsumerConnect, nevertheless, learnt local and foreign analysts have predicted that a decline by 10 percent would take the Naira to about N400 to a US Dollar, while a 20 percent drop would push it up around N450 to a Dollar.

Hitherto, the Monetary Policy Committee (MPC) of the CBN has foreclosed the possibility of devaluing the Naira.

The Bankers’ Bank has stated that it has sufficient foreign reserves to meet all its obligations without recourse to hurting the nation’s currency.

Mr. Godwin Emefiele, Governor of CBN, made the disclosure at the 271st MPC meeting and first one in 2020, in Abuja, FCT, Friday, January 24, saying the decision was taken by all the 11 members of the MPC in attendance.

On speculations by economic experts who had opined that CBN might devalue the Naira amidst a sharp reduction in foreign reserves from about $47billion to $38billion in few months in 2019, Mr. Godwin Emefiele, Governor of CBN, had said: “We should realise that reserves are there to meet obligations.

“At times it’ll go up and at times, it’ll reduce.

“But with reserves of about $38billion today and crude prices hitting up to $70 a barrel, we can sustain the economy without devaluing the Naira.”

According to Bloomberg survey of investors, however, the local currency may be marked down by up to 20 percent in 2021.

The survey revealed that the drop in the nation’s foreign reserves and lower oil prices in the international market would probably ‘force’ the Central Bank of Nigeria to devalue the Naira by next year.

The continued relative stability of the Naira against the Dollar is said to have continued to spark speculations, with many analysts predicting that the local currency will sooner or later be devalued, stated the survey report.

The Bloomberg survey of investors and analysts indicated that 10 out of 19 respondents expect the Naira to be weakened in 2021, while five predict a mark-down as early as the second half of this year.

The remainder (four) believe the CBN will keep a firm grip on the currency until 2022 or 2023.

The CBN has instituted several policies to defend the Naira, including restricting importers’ access to Dollars and stepping up the sale of high-yielding debt to attract inflows from portfolio investors.

The CBN, further still, has backed the Federal Government’s closure of some land borders, designed to stop smuggling of foods, other foreign products and contraband.

Most respondents say Nigeria cannot keep defending and sustaining Naira’s stability beyond 2021.

All but four of the survey participants said the Naira is more than 10 percent overvalued against the Dollar. Two respondents said it was at least 20 percent too strong.

The currency has traded around 360 to 365 per Dollar since its last devaluation in 2017. While the CBN says the exchange rate is determined by the market, it is much less volatile than other oil currencies, such as the Russian Ruble and Kazakh Tenge.