The Central Bank of Nigeria (CBN) will probably devalue the naira by as much as 10 per cent this year amid a lingering forex scarcity in the country, according to a Bloomberg survey of investors and analysts. The business and financial news medium said in a report yesterday that of the 17 survey participants, eight forecast a devaluation of between five per cent and 10 per cent this year; five saw a devaluation of more than 10 per cent and the remaining four predicted a markdown of as much as five per cent.
The median of analysts’ estimates project the naira at N426.5 per dollar by the end of 2021, from around N393 on Wednesday. An acute shortage of dollars continues to weigh on the naira even after the apex bank was forced to weaken its official rate twice last year after a sharp drop in the price of oil, the country’s main export and source of greenbacks. A recovery in crude prices to pre-pandemic levels could help the CBN keep its grip on the currency, but not for too long, analysts said.
For instance, Bloomberg quoted a partner and Chief Economist for Nigeria at PricewaterhouseCoopers, Andrew Nevin, as saying “if you don’t have sufficient dollars, the idea that you’re controlling the naira is a fiction. It is impossible to get sufficient investment for the economy to grow above six per cent without a unified exchange rate.” Grappling with the sharp drop in oil prices, as well as the Covid -19 crisis, the government of President Muhammadu Buhari, who has promised 10 per cent annual growth, agreed to merge the country’s multiple exchange rates and allow the naira to float more freely. The World Bank is withholding a $1.5 billion loan until the government moves ahead with currency reforms to attract investment.