The Central Bank of Nigeria may revise its target for the naira by about 20 per cent to N240 to N250 per dollar as oil prices continue to drop, financial experts have stated.
Alan Cameron, a London based economist at Exotix Partners LLP said the CBN is facing growing pressure to devalue the naira as the price of oil, which is Nigeria biggest source of foreign exchange crashed to its lowest since 2004.
“The need for a devaluation of the naira has been obvious for some time, all the more so after the latest drop in oil prices,” Cameron said.
The naira which sold for N272 to a dollar at the parallel market on Wednesday went for N199.29 at the official market in Lagos on Thursday.
“Cumbersome foreign-exchange restrictions are strangling economic growth,’’ John Ashbourne, London-based Africa economist at Capital Economics, said in note to clients on Wednesday. “The authorities will be forced to devalue the naira in the first half of 2016.”
Africa’s biggest economy needs more flexibility in setting monetary policy so it can use its foreign-currency reserves to support the poor population, International Monetary Fund managing director Christine Lagarde told Nigerian President Muhammadu Buhari on Tuesday. The central bank has held the naira at N197 to N199 per dollar since March as Governor Godwin Emefiele introduced trading curbs to conserve reserves and stem a rout after it fell to a record N206.32 in February.
Nigeria, with more than 170 million people, is struggling to cope with crude prices that have fallen almost 70 per cent since their peak in June last year to below $40 a barrel. Brent crude for February delivery tumbled 3.4 per cent to $33.07 by 7:15 a.m. in London.
Oil accounts for two-thirds of government revenue and almost all exports. The slump is weighing on growth, which is forecast to slow to 3.2 per cent this year, the slowest pace this century, according to a Bloomberg survey of economists.