Nigeria’s currency is poised to weaken even after authorities threatened to cut the banking services of exporters who fail to repatriate their dollars in a bid to boost scarce foreign-exchange supplies.
Bloomberg reported that the naira will probably depreciate more than 8 per cent from current levels to 430 per dollar on the spot market this year because demand for foreign currency is just too overwhelming for any additional inflows from exporters to make a difference, said Michael Famoroti, the Chief Economist for Stears Data in Lagos. “There is still underlining pressure,” he said.
“That’s what the reality is.” That’s more bearish than the median estimate of 17 economists in a Bloomberg survey last month for the naira to end 2021 at 426.5. It also comes after the currency rallied 4.2 per cent in January, the best month for the naira since August 2002.
It weakened 9.7 per cent last year. The Central Bank of Nigeria (CBN) gave exporters until Jan. 31 to bring home money made abroad in an effort to alleviate a foreigncurrency shortage that’s hindering the operations of businesses and deterring investors.
Lower oil prices and lockdowns to contain the coronavirus pandemic are drying up inflows to Africa’s largest producer of the commodity.
The Central Bank is seeking to avoid another devaluation of the naira through a multi-tiered foreign- exchange system that the World Bank has said needs to be unified into a single window to boost confidence.
Nigeria has also halted foreign-exchange supplies to food and fertilizer importers and ordered lenders to terminate customers who fail to repatriate earnings to defend its currency. The naira dropped 3.6 per cent on Wednesday to 394.52 per dollar by 8:47 a.m. in Lagos.
It was changing hands at 480 on the parallel market, compared with 470 on Jan. 4, according to abokifx. com, a website that collates parallel market data. The difference between the unofficial market rate and the spot value encourages companies to skirt official channels when converting currencies so they get more naira to spend locally, said Ayodeji Ebo, an analyst at Greenwich Merchant Bank.