Economist Predicts Likely Devaluation of Naira To N250/$

According to experts, financial authorities are facing increasing pressure to further devalue the naira as the price of oil, its biggest source of foreign exchange, trades at the lowest level since 2004.

Alan Cameron, London-based economist at Exotix Partners LLP, said in a research note, that the Central Bank of Nigeria, CBN, may revise its target for the naira by about 20 per cent to N240 to N250 per dollar as oil continues its decline, .

The currency was little changed at N199.29 per dollar on Thursday, January 7, in Lagos, the commercial nerve centre.

“Cumbersome foreign-exchange restrictions are strangling economic growth,’’ John Ashbourne, London-based Africa economist at Capital Economics, said in note to clients on Wednesday. “The authorities will be forced to devalue the naira in the first half of 2016.”

Nigeria needs more flexibility in setting monetary policy so it can use its foreign-currency reserves to support the poor population, International Monetary Fund managing director Christine Lagarde told Nigerian President Muhammadu Buhari on Tuesday.

The central bank has held the naira at N197 to N199 per dollar since March as Governor Godwin Emefiele introduced trading curbs to conserve reserves and stem a rout after it fell to a record N206.32 in February.

Nigeria, with more than 170 million people, is struggling to cope with crude prices that have fallen almost 70 per cent since their peak in June last year to below $40 a barrel. Brent crude for February delivery tumbled 3.4 per cent to $33.07 by 7:15 a.m. in London.

“The need for a devaluation of the naira has been obvious for some time, all the more so after the latest drop in oil prices,” Cameron said.