Economists and other development experts are forecasting a sustained weakening of the national currency’s (Naira) exchange rates against other international currencies in the months ahead on the back of accumulated demand even when economic activities are at lowest ebb.
Some of the experts hinged their prediction on the recent adjustment of the official window exchange rate from about N305 per dollar to N360 per dollar, saying that the official window’s rate remains the key determinants of rates in the unofficial windows. In his comment to Daily Trust’s enquiries on the prospects of the Naira exchange value in the months ahead, a finance expert and business consultant, Dr. Boniface Chizea, pointed out that Naira may suffer further depreciation as there are neither adequate economic activities nor other mechanisms to halt the decline.
He said: “Yes, I foresee that the Naira may continue to suffer depreciation as there are no economic activities now that can support its appreciation, especially when we are getting the country’s debt stock is growing and exports earnings are dwindling. “With not very strong foreign reserves and growing debt, Nigeria’s credit ratings may no longer be as impressive as it used to be.
So, both external and internal factors are not promising now and the Naira will be suffering in terms of its exchange rates against other currencies. But then, this may not be so significant based on the state of the global economic system now”, Chizea added. Another economist, Oluwasola Emmanuel, agrees with Chizea’s position, saying that the black market rates in the past few weeks “shows clearly that there is nothing to hedge the depreciative trend now as the CBN cannot do more than it is currently doing.
“What the government needs to do, which I doubt if it has the capacity now, is to vigorously support local industries so that importation, particularly of food items which I heard Nigerian households spent about N27 billion on last year, is reduced. If they fail, the Naira may go for as much as N500 per dollar before the year is over”, he added. Analysts are linking the weakening Naira value to growing demand in the black market for the scarce greenback (dollar) as investors and importers with payment obligations that have accumulated over the past months are sourcing for forex amid hard currency shortages.
On Thursday, the Naira traded at N450/$ on the streets Lagos at the black market while investigations by Daily Trust showed that in Abuja, it exchanged for between N440 and N450 per dollar as BDC operators lament dollar scarcity. Despite the anxiety, some analysts say that the resumption of forex sales to some categories of users last week by the CBN may help in firming up the Naira on the official and over-the-counter spot markets.
