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Poll shows CBN is set to devalue Naira officially, what this means

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A poll sampling financial experts has revealed that the Central Bank of Nigeria (CBN) will devalue the country’s currency, Naira after the 2023 election.

According to Bloomberg, which conducted the poll, the expected devaluation will be the biggest in the last six years.

The feelings from the respondents is coming amid huge exchange rate gap between the official market and parallel markets by almost 77 per cent.

Ripples Nigeria had earlier reported that Naira on Tuesday dropped to N800 at the parallel market but closed at the official market at N446.67 This represents a difference of N353.3.

Of the 13 participants in the Bloomberg poll, 11 expect the Central Bank of Nigeria to devalue the naira after the election.

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The remaining two predict it will continue with a gradual depreciation of the currency that started with the adoption of the more flexible NAFEX, also known as the investors and exporters exchange rate, last year.

The median of 10 participants in the Bloomberg poll sees the fair value of the local unit at 583 per dollar.

Last month, Bank of America Corp. Economist Tatonga Rusike gave a similar prediction.

 

Read also:Naira redesign: CBN confirms rising deposits


The implication of the devaluation

Should the CBN go ahead with its plan, it is likely that Nigeria’s inflation which is at 21 per cent will jump further as traders and exporters will adjust prices.

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Another significant impact is the cost of foreign loans, this will mean Nigeria will need more Naira to pay off the outstanding $40.06 billion as of June 2022.

On the bright side, however, the devaluation of the currency would help stop the shortage and rationing of dollars.

This is because more foreign investors will come into the country knowing there is a clear understanding of what their investment is worth.

Analysts have always shared the opinion that Nigeria’s foreign exchange crises have been a drag on business operations in the country and an overall disincentive to invest in Nigeria.

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