There are strong indications that the Central Bank of Nigeria (CBN) may devalue the naira to 400 against the dollar on the official market.
A macroeconomics expert and research analyst at FXTM, Lukman Otunuga, in an interview with TheCable, revealed that with the current situation facing the country, the Apex Bank might raise the value of the local currency to within N600 at the parallel market.
Otunuga, who predicted the devaluation of the naira in 2016, said the apex bank should conserve rising foreign reserves, while letting the naira depreciate to N400 per dollar.
He said: “In December, it was 18.55 percent. The problem behind this is that we have a situation where producers do not have the ability to get dollars at the official rate.”
“So they use the black market and by using the black market, they push the cost back to consumers.
“This is what is happening, and this is almost very hard for the CBN to tame. So in three to six months, there is a very string possibility of the Central Bank of Nigeria devaluing the naira, yet again, from 305 to probably 350 to 400 to increase liquidity and attract investors.
“In this situation, the best is for the Central Bank of Nigeria (CBN) to hold reserves. The major thing is that they are actually buying, keeping the naira artificially at 305, this has created scarcity. I think it is best to let the reserves grow, and effectively devalue the naira.
“If they do that, it has the ability to pushing the parallel market further to 550 to 600. You have to keep in mind, that the main reason why the parallel market exploded into uncharted territories was because we had recession fears, hike in US rates, and weak oil.”