By Adedapo Adesanya
The Naira took a large hit in 2020 due to the double-barrelled effect of the coronavirus pandemic and the oil price crash, and although many believe that the local currency will recover, this won’t be the case until February 2021, as per a survey by the Central Bank of Nigeria (CBN).
This was contained in the apex bank’s statistics report titled December 2020 Business Expectations Survey Report.
From December 7-11, CBN conducted an online survey for 1,050 businesses nationwide, with a response rate of 91.3 per cent covering a wide range of sectors such as agriculture /services sector, manufacturing, wholesale/retail trade and construction.
The firms, CBN added, were made up of small, medium and large corporations covering both import-oriented and export-oriented businesses.
It noted that the “respondent firms expect the Naira to depreciate in the current month and next month but appreciate in the next 2 months and next 6 months.”
In 2020, analysis showed that the local currency lost almost 27 per cent in value with devaluation occurring twice within the space of six months. This saw the CBN crash the value of the local currency to N380/$1 from N360/$1 after it was initially devalued from N306/$1.
However, the last few weeks saw the Naira face severe challenges across all the segments as it hit N500/$1 at the black market segment.
Although this pressure has eased, the dollar currently trades around N465/$1. This indicates a disparity across other segments such as the specialised Investors and Exporters (I&E) market which trades at N392/$1 while the Bureau De Change and the Interbank rates remained at N395/$1 and N379/$1 respectively.
It is also important to consider that the nation is in its worst recession as it suffered a 3.62 per cent contraction in its economy in the third quarter of 2020.
This is the second consecutive quarterly GDP decline since the recession of 2016. The cumulative GDP for the first nine months of 2020, therefore, stood at -2.48 per cent.
The last time Nigeria recorded such a cumulative GDP was in 1987 when GDP declined by 10.8 per cent.
However, there are expectations that the country will exit the recession in 2021.
In addition, the CBN survey noted that 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 respectively.
The 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 respectively.
Modupe Gbadeyanka