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Dollar is expected to hit the dreaded 1000 naira mark at the parallel market by the end of the year unless monetary policy managers – The Central Bank of Nigeria (CBN) – does something dramatically drastic.
According to many analysts, indications are rife that the Naira is inching closer and closer to official devaluation on the back of fund rate hikes in the United States of America, United Kingdom and the rest of Europe.
“The Naira is about to be devalued within days,” a very reliable US-based economist told Prime Business Africa in a chat on Wednesday. ”USA Federal Reserves just increased her fed fund rate by 75 basis points and this action definitely will have global consequences,” he said without giving further details, when asked why he was preempting the move.
The wide discrepancy between the black market (N720+/1$) and the CBN’s official window (N431.09+/1$) has been a major concern for the apex bank which has legitimately starved Bureau de Change (BDC) operators of forex supply and at many times swooped on them with security agents, including the Economic and Financial Crimes Commission (EFCC).
Notwithstanding, the current trend at the parallel market points to the possibility that the dollar could indeed exchange for N1,000 by December, 2022.
This and many other factors – including the fund rate hikes and pressure on external debt servicing – mount substantial pressure on the CBN to consider official devaluation of the currency whose value is already considered as wrongly and artificially pegged at N431.09/1$
Devaluation – a reduction in the value of a country’s money exchanged for that of another – has remained an attractive option for Nigeria and other countries in recession and has always been in sync with the advice of the International Monetary Fund (IMF) in that regard.
Weak (devalued) currencies are best for exports-enabled and heavy forex-earning countries, among which Nigeria has lost a meaningful position.
Nigeria faces its currency war even as countries are fighting to strengthen their currencies against the dollar by revving up local manufacturing and production for exports as well as through monetary policy interventions.
