The Central Bank of Nigeria has disclosed that a survey carried out by its Statistics Department revealed that the naira is expected to depreciate further in January 2021.
The report, titled, ‘December 2020 Business Expectations Survey Report’ added that there might also be a steady rise in interest rate from December till the next six months.
The naira witnessed a sharp fall in recent weeks, reaching its lowest on November 30, 2020, when it exchanged for N500/$1. Since then, the dollar has been hovering between N460 and N470. As of Friday, however, one dollar exchanged for 465 in the parallel market.
Also, the Nigerian economy had on November 21 slid into its second recession in five years when the economy shrank again in the third quarter. The recession is said to be the worst in 36 years, according to the data obtained from the World Bank. The Federal Government and some economists had expressed optimism that the country would exit the recession in 2021.
Meanwhile, in the 11-page survey report, the CBN said it conducted the survey online from December 7 to 11, with a sample size of 1,050 businesses nationwide. It noted that a response rate of 91.3 per cent was achieved and that the sample covered the agriculture/services, manufacturing, wholesale/retail trade and construction sectors.
It added that the respondent firms were made up of 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.
Meanwhile,the President, Chartered Insurance Institute of Nigeria, Muftau Oyegunle, said it was unlikely that much could be done on the inflation rate because the crisis in the North had drastically cut down food supply, whereas food supply from the North is a major source of food items in the country.
While he did not subscribe to the fact that naira would depreciate further, he said, “Fundamentally, one thing that is clear is that Nigerians abroad are the ones sustaining this economy through remittances even before Nigerians acknowledged the role the money from abroad is playing in the economy.null
“Remittance from Nigerians abroad is more than what we earn from oil and this is making the difference in the value of the naira.”