The Central Bank of Nigeria (CBN) has revealed that based on a survey done by its Statistics Department, there are strong indications that the Naira will decline in value in January 2021.
The report titled, ‘December 2020 Business Expectations Survey Report’ also states that there is a likelihood that interest rate will go up from December till May 2021.
The local currency suffered a sharp decline in recent weeks, hitting its worst level when it traded at ₦500 to $1 on November 30. The Naira has so recovered marginally, shuffling between ₦460 and ₦470 to $1.
The economy is currently dealing with a second recession in five years. According to the World Bank’s data, this recession is Nigeria’s worst in 36 years. The Federal Government and some economists had expressed optimism that the country would exit the recession in 2021.
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The CBN disclosed that it conducted the survey online between December 7 to 11, with a sample size of 1,050 businesses nationwide. It noted that a response rate of 91.3 percent was achieved and that the sample covered the agriculture/services, manufacturing, wholesale/retail trade, and construction sectors.
It further stated that the respondent firms comprised small, medium and large corporations covering both import-oriented and export-oriented businesses.
The report partly read, “Respondent firms expect the naira to depreciate in the current month and next month but appreciate in the next two months and the next six months.
“Inflation level is expected to rise in the next six and 12 months as firms expect the average inflation rate in the next six months and the next 12 months to stand at 13.24 and 14.51 per cent, while borrowing rate is expected to rise in the current month, next month, next two months and the next six months with indices of 19.2, 14.9, 14.7 and 14.3 points.”
In the survey, respondent firms expressed pessimism on the macro economy, while their outlook on the volume of business activities, average capacity utilisation, the volume of total order and financial condition (working capital) were positive.
The CBN stated that respondent firms identified insufficient power supply, unfavourable economic climate, competition, high interest rates, unclear economic laws, financial problems, unfavourable political climate, access to credit, insufficient demand, lack of equipment, lack of materials input, and labour problems as major factors constraining business activities in December 2020.
