The Central Bank of Nigeria (CBN) has said the naira will begin recovery against the dollar and other global currencies from February 2021. The apex bank also said that loan cost will begin to rise starting from this month.
The predictions are contained in the latest CBN Business Expectation Survey released by its Statistics Department.
According to the report, respondent firms said although the naira has for several months depreciated against the dollar, the local currency appreciation against the greenback will start from February 2021 till July same year.
The naira was a month ago exchanging at N500/$ at the parallel market before it appreciated to N465/$ at the weekend. The local currency has however remained stable at N379/$ on the CBN’s official rate, a check at the apex bank’s website showed.
The December 2020 Business Expectations Survey was conducted online from December 7 to 11, 2020 with a sample size of 1050 businesses nationwide.
A response rate of 91.3 per cent was achieved and the sample covered the agriculture/services, manufacturing, wholesale/retail trade and construction sectors. The respondent firms were made up of small, medium and large corpora ons covering both import-oriented and export-oriented businesses.
On the state of the naira, Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said the local currency has lost over 26.72 per cent of its value so far in 2020. He attributed the naira’s continued decline to heightened forex supply shortage, demand pressure and rationing. He disclosed that for the naira rates to converge would require adoption of a full floating exchange rate system determined by the forces of demand and supply.
Also, the International Monetary Fund (IMF) had called for unified exchange rate for the naira to promote growth and attractive foreign capital.
The CBN CBN had last month devalued the naira by N6 to dollar. The naira devaluation brought the local currency closer to the exchange rate unification agenda of the apex bank as recommended by the International Monetary Fund (IMF) and World Bank.
In a weekly exchange rate for disbursement of proceeds of International Money Transfer Service Operators (IMTOs) for November 30, 2020, all authorized dealers, Bureaux De Change and Service Providers were advised to add N6 across all rates.
The new rates pegged IMTOs sale of dollar to banks at N388 to dollar, higher than previous rate of N382 to dollar; banks sale of dollar to CBN at N389 to dollar, as against previous rate of N383 to dollar.
Also, CBN sale of dollar to BDCs was pegged at N390 to dollar, as against previous rate of N384 to dollar. The BDCs are directed to sale to end-users at not more than N392 to dollar, as against previous rate of N386 to dollar.
The Nation’s findings showed that dollar demand pressure has continued to weigh in from importers stocking up for Christmas sales and finding it difficult to source from the official market, are directing their demand to the parallel market.
The naira depreciation has also been linked to exporters moving huge dollar earnings to the parallel market where major transactions are now being handled.
Shipping and airline companies have also been accused of depriving Nigeria of the much-needed dollar earnings by not remitting export proceeds. The CBN has been monitoring non-oil exporters, especially airlines and shipping firms, and assessing their compliance with the export proceeds repatriation policy.
Respondent firms in the survey also identified insufficient power supply (68.3), unfavorable economic climate (65.7) competition (64.8), high interest rates ( 64.5) unclear economic laws (62.7), financial problems (61.9), unfavourable political climate (59.4), access to credit (53.1) insufficient demand (49.3), lack of equipment (41.5) lack of materials input (41.1) and labour problems (27.87) as major factors constraining business activity.
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