The Naira on Tuesday dropped to 498 per dollar against 493 it was sold on Monday by open market dealers; this is even as a group of experts at Financial Derivates Company Limited (FDC) predicted that the Nigerian currency is expected to depreciate further to N520 in February despite recent intervention by Central Bank of Nigeria (CBN).
In our fact findings, we discovered that the naira on Monday appreciated by total points of N7 to close at 493 per US Dollar, against N500 it traded at the parallel market on Friday, but relapsed at the end of yesterday trading to close at 498 per dollar at parallel market.
At the official window, nothing seems changed as the naira closed at 305.25 the same rate it has been trading since August 2016.
The CBN last week had release of $660 million, measure expert said was to tackle illiquidity in the system.
The Chief Executive Officer, FDC, Mr. Bismarck Rewane in its presentation for February economy outcome noted that attempts by market stakeholder to use forwards to stabilize the market will be futile.
He noted that the nation’s foreign exchange market is polluted and needs sanitization.
The local currency was quoted last Friday at N500/Dollar on the parallel market, while banks quoted the currency at N314.50/Dollar at the interbank market rate.
According to him, the CBN will need to fund the spot market consistently.
Rewane disclosed that the capital market will trade flat to negative in February with more surprising negative corporate earnings to be announced in March.
However, a group of Researcher at FSDH noted that the current foreign exchange shortage and the pressure on the economy from the external sector are changing the consumption and the production patterns in the country.
“These challenges provide exceptional opportunity for Nigeria to look inwards and build comparative advantage. This will create employment opportunities, industrialise the economy and provide the platform to earn the needed foreign exchange, the company in its Economic and Financial Markets Outlook for 2017 – 2021 explained.
The company noted that under a managed float foreign exchange system, it is difficult to forecast the foreign exchange rate.
However, the researchers believe that Oil Price Forecast /Crude Oil Production, Political Stability, Political Stability, among other factors will drive the foreign exchange rate in the short-term.
“We think the foreign exchange rate may trade between $300 – S$315 in 2017. With increased non-oil exports, drop in imports, improved productivity from energy supply; the foreign exchange rate may appreciate in 2018,” the company explained in its report.
Also, expert at Afrinvest West Africa Limited, predicted that the official exchange rate of the naira would tumble by about 31 per cent to N400/dollar before the end of this year.
In its 2017 economic outlook, the firm said the CBN might be forced by possible developments in the currency market to devalue the naira from the current N305/dollar to around N400/dollar.
“If you think about the monetary policy environment, we think that the CBN will be forced by the market to make a change.
“Currently, the naira is pegged at N305/dollar; we see it moving towards N400/dollar by the end of the year,” the Group Managing Director, Afrinvest, Mr. Ike Chioke, said at a press conference announcing the firm’s economic outlook.