The Naira lost some of its recent gains Monday, after falling to N480 on the parallel market on the day the Economist Intelligence Unit, EIU said it saw the Nigerian currency falling to N450 on the official window in 2021.
The Naira rose to N470:US$1 last week after measures by the central bank to relax controls on the receipt and application of diaspora remittances in Nigeria but the currency came under renewed pressure Monday as the impact of that relaxation began to wear off and businesses sought cover for their unmet FX demand.
In its latest report, the EIU said, “assuming that oil prices stay low in 2021 and with low domestic interest rates sustaining capital outflow pressures, activated as and when the CBN drip feeds foreign exchange to official windows, we expect a devaluation of the official rate in that year (2021).
“This will take the naira from N379:US$1 at end of 2020 to N450:US$1 at end 2021. The official and NAFEX rates will be broadly unified in the process.”
The EIU said it expects that thereafter, the official exchange rate to the dollar will be kept relatively stable.
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It said monetary tightening in Nigeria will “again encourage hot money inflows, higher oil prices will boost foreign exchange access (lessening concerns over capital controls), and the current account is forecast to return to surplus.”
The EIU said whereas the divergence between official and NAFEX rates is likely to re-emerge, “the CBN should be able to supply adequate liquidity to the regulated foreign exchange channels, broadly stabilizing the market even as world oil prices (and so net foreign exchange inflows) fluctuate.”
Data on transactions on the Investors’ & Exporters’ (I&E) FX Window, show the total value of trades for the week-ended November 27, 2020, rose to $0.61 billion, representing an increase of 12.96% ($0.07 billion) from the $0.54 billion reported for the week-ended November 20, 2020, bringing the total value of trades at the window to $35.15 billion for 2020.
