“CBN Lacks Experience”: Naira-Dollar Exchange Rate To Hit N1,018, Economist Predicts Forex Policy Reversal

• Economists at EIU have predicted that the expect Nigerian currency, the naira to fall to as low as N1,018
• They noted that the challenges of rising inflation, which is now at a 17-year high, and also CBN's lack of experience will lead to the fall
• EIU is also predicting that the CBN will reverse its forex policy and major intervention if the naira continues its slide

The Nigerian currency, the Naira is expected to continue to face pressure and fall to as low as N1,018 per dollar in 2027.

This is according to the prediction from the Economist Intelligence Unit (EIU) in its latest report about the state of the Nigerian economy.

The EIU made the prediction stressing that the average rate is forecast at N815 to US$1 in 2024, sliding to N1,018 to US$1 by the end of 2027, with a spread of 10-15 percent against the black market over the period.

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Part of the report reads:

“Along with high and rising inflation, the naira will be under significant pressure in the near term."

CBN to reverse forex policy

EIU also noted in its report that it believes the Nigerian government will go back to a system where they have more control over the exchange rate.

It noted that this will be part of the CBN effort to try and stop the naira from losing its value much further.

The EIU also pointed out that the CBN, which manages the country’s money, doesn’t have much experience handling a flexible exchange rate system.

The EIU said:

“The CBN lacks experience in conducting monetary policy under a float, and the need to control rapidly increasing inflation will become more acute over time.

“Our forecast is finely balanced, but we expect a return to heavier exchange-rate management from the second half of 2023 as the naira slides beyond N800:US$1 from N770:US$1 in early July.”

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The research and analytical firm also stated that there is presently a scarcity of foreign currency in the country, particularly concerning meeting demands for foreign exchange through Form A and M.

This scarcity, coupled with speculators capitalizing on the situation, EIU stressed could lead the CBN to increase their involvement and "intervene" in the market, given that approximately 98 percent of their foreign reserves are in cash.

CBN speaks on license status of 2,698 BDCs as Naira falls again

In another report, the Central Bank of Nigeria has responded to reports that it withdrew over 2,000 Bureau de Change operators' licenses

The reports of withdrawal come amid the continued depreciation of the naira at the official and black markets

The CBN and the Bureau De Change Operators of Nigeria spoke with Legit.ng to set the records straight

Source: Legit.ng