The naira 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.
The country has been unable to catch in on OPEC+ agreement that supplies by increased with seemingly better economic outlook. The result is that earning from dollars have shrieked.
The naira will probably depreciate more than eight per cent from current levels to N430 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 N426.5. 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 gave exporters until January 31 to bring home money made abroad in an effort to alleviate a foreign-currency 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.
