CBN Predicts New Naira Rate as Currency Depreciates by 70% Against Dollar
- Nigerian businesses expect the naira to weaken between now and December, but to strengthen the next year
- Businesses encountered challenges such as high interest rates, insufficient electricity supply, many levies, and others
- According to the data, Nigeria's annual inflation rate decreased to 33.4% in July, the first slowdown in nearly two years
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.
A Central Bank of Nigeria (CBN) study has shown that Nigerian firms anticipate the naira depreciating between now and December but appreciating next year.
Source: UGC
According to a report released on the Central Bank of Nigeria's website, which is situated in Abuja, 1,600 businesses responded to the survey and indicated that they expected the naira to depreciate in the current month, next month, and next three months but appreciate in the next six months.
Since June 2023, when it was granted wider trading freedom in an attempt to regain investor trust in the economy, the value of the local currency relative to the US dollar has decreased by almost 70%.
Currency depreciation affects companies
Due to the currency's depreciation, BusinessDay reported that a number of companies with dollar-denominated debt, notably MTN Group Ltd., the largest mobile provider in Nigeria, experienced losses as those debts surged in naira terms.
Every month, the Business Expectations Survey evaluates top Nigerian companies in a variety of industries, such as manufacturing, construction, energy, and services.
In an effort to promote openness and increase public access to economic data, the central bank revived the report this month along with other publications.
The largest challenges the businesses faced while operating in the most populous country in Africa were not only the declining value of the currency but also the high interest rates, inadequate power supply, numerous taxes, and corruption.
“Their perception of inflation indicated that they consider the current inflation rate of 34.19% too high,” the central bank said, in reference to June inflation data.
The nation’s annual inflation decelerated for the first time in almost two years to 33.4% in July, data released showed.
Charles Abuede, a financial analyst said that the challenging business environment in Nigeria, characterised by unfriendly conditions due to multiple taxation issues, poses a significant obstacle to ease of doing business.
He added,
"Additionally, challenges in accessing foreign exchange (FX) in the foreign exchange market, coupled with inconsistent FX policies, compel these firms to increase prices, creating a mismatch with consumers' affordability."
CBN records highest amount of dollars
Legit.ng reported that the Central Bank of Nigeria (CBN) has announced a notable surge in remittance inflows, which climbed to $553 million in July 2024, marking a 130% increase compared to the same period in 2023.
This was disclosed in a statement by the Acting Director of Corporate Communications, Hakama Sidi Ali.
According to Ali, the figure represents the highest monthly inflow on record and underscores the CBN's ongoing efforts to boost liquidity in Nigeria’s foreign exchange market.
Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng
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