Depreciation of the Naira Against Dollar is Likely – Rewane

Forex Market
Forex Market

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane has projected that as oil prices stay at $40-$43 per barrel, the naira will be weakened in the parallel market and likely depreciate to 470-475 against the dollar in November and December.

Rewane stated this in his presentation at the Lagos Business School Breakfast Session last week.

According to Rewane, oil prices are under pressure again, currently trading below $41 per barrel and this will further limit foreign exchange supply.

In the parallel market, the Nigerian currency is currently trading around 462 to 465 against the greenback.

READ ALSO: CBN Devalues Naira Again, Official Exchange Rate Now N380/$1

Rewane said the resumption of international flights, trading and manufacturing activities would heighten forex demand pressures. He added that the International Monetary Fund’s Article IV review had started and that the Central Bank of Nigeria would come under additional pressure.

“As Nigeria ponders IMF’s conditionalities, CBN could succumb to pressure and devalue the naira to N390-400/$,” he said.

According to the financial expert, the 2021 budget is likely to be reviewed, as a result of the impact of lower oil prices and higher expenditure as well as the #EndSARS crisis, which will deepen the economic crisis and delay the recovery.

Against the background of the need to provide further stimulus in the wake of the #EdSARS crisis and surging inflation and currency pressures, Rewane noted that CBN’s Monetary Policy Committee meeting in November would take place.

Rewane also noted that a second wave of COVID-19 and global lockdowns would trigger a fall in commodity prices, trade activities, capital flows and remittances. According to him, a Joe Biden presidency in the United States will mean increased focus on renewable energy; a revival of the Iran nuclear deal; banning of fracking on US federal lands, and the US to rejoin the Paris accord on climate change.