Naira may exchange for N200 per dollar – Analysts
The naira, which exchanged at N147.10 per dollar at the inter bank foreign exchange market on Friday, may fall to between N165 and N200, a report on the outlook for 2009 by investment banking company, Vetiva Capital Management Limited, has predicted.
The naira had appreciated against the United States dollar on Friday, from N150.75 to N147.10 per dollar.
The appreciation was attributed to developments at the Retail Dutch Auction System and the assurances given by the Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, that the currency would appreciate in the near future even with sagging oil prices.
Soludo, had on Thursday in Abuja, said that he believed the naira, which had depreciated by more than 20 per cent since last November, would strengthen in the near future even with oil prices down to $40 a barrel
But Vetiva analysts noted in the report, which was obtained by our correspondent on Sunday, that the factors that would trigger a further fall in the value of the naira include the persistent fall in oil prices, diminishing oil production and decreasing foreign reserves.
They argued that the CBN might meet demand for foreign exchange at the early stages, but as the reserves at its disposal continued to dwindle without adequate replacement options, demand would exceed supply, thereby forcing the naira to suffer significant depreciation.
This, they said, would push the naira to exchange between a range of N165 to N200 to a dollar at some periods during the year.
“We expect that the depreciation of the naira against major economies as witnessed towards the end of 2008 will be sustained in 2009.The CBN seems to have abandoned any effort to support the value of the currency, probably recognising that it would be a prohibitively expensive long term policy to pursue,” the analysts said.
They added, “The impact on economic activity will be negative, thus making the ever increasing levels of import more expensive and worsen our current account situation.”
On the level of inflation in the country, they said with the depreciating naira negating any positive effects, there would be a continuous increase in the level of inflation.
“Our outlook is a continuous increase in inflationary levels, with the depreciating naira negating any positive effects that may accrue from falling energy costs.
“The rising cost of imports will create additional upward pressure on price levels. We also believe that the government’s budget deficit will further aid a build up in inflationary pressure,” they added.
