Naira may devalue by 20% in 2023 – Bank of America

As its present exchange rate to the dollar is far higher than fair value, Nigeria’s local currency unit is expected to decline even more during the course of the following year, according to Bank of America.

The commonly utilized black market rate, the real effective exchange rate set by the central bank, and our own study of the naira’s fair value all indicate that the currency is 20% overvalued, according to a Bloomberg report on economist Tatonga Rusike’s message to customers on Tuesday.

Over the following six to nine months, “we see potential for it to weaken by a comparable amount, putting it to as high as 520 per USD.”

Devaluation is not likely to occur until after the February 2023 presidential elections, despite the naira being under increasing pressure “due to restricted government external borrowing,” the bank stated.

The biggest economy in Africa runs on a dual exchange system with a closely regulated official exchange rate and a free-floating parallel market.

According to the operators of the bureau de change, the official spot rate of the naira to the dollar was N440.95, but the parallel rate increased to N740.

According to a BofA analysis, the gap between the official and parallel rates has increased to about 70% while the official rate has declined by less than 10% since December 2021.

The risk of an increase in excess demand for foreign currency on the black market is higher the more divergence there is from the official market, according to the bank.


we promote good music and provide genuine gist content

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back to top button
%d bloggers like this: