Nigerian businesses expect the naira to depreciate between now and December. In the same breath, they show optimism about the local currency’s strengthening next year, a survey by the Central Bank of Nigeria shows.
The survey was conducted in the third week of July and was published on the CBN website on Wednesday.
The periods reviewed, according to the survey, are the current month (July), next month (August), next three months (October) and next six months (January 2025).
According to the poll which sampled 1,600 enterprises nationwide, firms expect the naira to “depreciate in the current month, next month and next three months but appreciate in the next six months.”
The naira has plummeted by over 100 percent since the FX reforms in June last year, moving from N460/$ to N1,592/$ on Wednesday, despite the CBN’s liquidity tightening measures and efforts to restore investor confidence in a market that had been damaged for eight years.
The naira fell to a new low of N1,610 against the dollar at the black market as dollar scarcity worsened on Wednesday.
The local unit crash has fanned inflation, which, despite slowing for the first time in almost two years in July to 33.40 percent, remains well above the CBN’s target.
According to the report, Nigerian businesses, especially large firms, considered June’s inflation figures at 34.19 percent as “too high”, but the recent fall is expected to offer some respite.
Along with the weakening currency, firms identified insecurity, high interest rate, insufficient power supply, multiple taxes and corruption as their biggest constraints in one of Africa’s largest economies.
The Abuja-based bank has raised benchmark interest rates by a total 800 basis points to 26.75 percent in a bid to rein in stubbornly high inflation. But high interest rates means increased borrowing costs for businesses.
The firms, however, expect the borrowing rate to rise to strengthen the ailing naira and quell the high inflationary trends.
“Although the rise in MPR (Monetary Policy Rate) may attract more investors to the fixed-income market due to higher yields, it has negatively impacted borrowing cost for businesses,” PwC said in a report published in June.
The firms, drawn from the manufacturing, construction, mining and quarrying; electricity, gas & water supply, services (market services and non-market services while agriculture is a stand-alone sector, express optimism as the business conditions in Nigeria are expected to improve.
The report also suggested an increase in the volume of employment by firms with the agriculture sector employing the most.
“The positive outlook in the volume of business activities of the firms in the next month implied improved prospects for employment in the same period. The sector with the highest prospect for employment is the Agriculture Sector, followed by the Industry and Services sectors,” the report stated.
