NIGERIAN currency, the naira, may be heading for more slump next year in its exchange rate to the dollar.
Predicting this further devaluation, Bank of America (BoA) warned Nigerians to expect as high as 20 per cent fall by naira.
Giving the warning to its clients in a report by Bloomberg, BoA’s chief economist, Tatonga Rusike said “from all the three indicators: the widely-used black-market rate, the Central Bank’s real effective exchange rate, and our own currency, fair value analysis shows the naira is 20 per cent overvalued. We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”
The report also said that “while the naira will come under increasing pressure due to limited government external borrowing, devaluation is unlikely to happen until after February 2023 presidential elections.”
It will be recalled that Nigeria operates a multiple exchange regime dominated by a tightly controlled official exchange rate and a parallel market where the currency is freely traded with naira exchanging at 440.95 to the dollar in the official spot while parallel rate went up to N740, according to bureau de change (BDC) operators.