Financial experts have warned of a further devaluation of the Naira in 2023, citing the worsened exchange rate convergence across the regulated and open market in 2022 as pointers.
Within twelve months, the exchange rate between the naira and the dollar rose to N461.50/$1 as at Friday, December 30, 2022, up from N422/$1 when it started January 2022 within the official market.
At the black market, the dollar rate went up by N175 within 12 months, as the cost of exchanging the dollar to naira ended the year hovering above N740, surpassing the year’s opener of N565/$1.
At the Investors and Exporters foreign exchange market, naira was sold at N461.50 at the close of the trading session in 2022, translating to about 11 per cent year on year depreciation from N416 in January, 2022.
In the parallel market, naira was sold at N740 with intermittent adjustment to N745. Though external reserves printed strong at $37 billion, the local currency exchange rate continued to worsen while the apex bank blocked dollars upstream from users.
Traders’ notes show that the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate traded within the range of N435.0-452.0/$ but closed at N461.50 for the United States dollar.
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As a result of its fresh red line crossing, FX has widened and analysts have raised their devaluation frenzy louder, saying there is no indication that the local currency will recover.
The experts recommended that the incoming administration will need to review some of the policies of the current administration in order to ensure flexibility in the foreign exchange market.
The Chief Executive Officer of Anthill Concepts Limited, Dr. Emeka Okengwu, said that at best, the value of the naira will remain as it is or it will erode in value in the coming months.
He noted that usually, currencies don’t do well in election years because there are a lot of assumptions; a lot of people stay on the fence. He further noted that he does not see the naira doing better over the next three or four months until the new government comes in and begins to steer clear policies.
Johnson Chukwu, the CEO of Cowry Asset Management, also agreed that the policies of the incoming government will determine the direction of the economy.
He said the right policies will stabilize the economy and increase the production of crude oil, as well as increase the country’s reserves, and therefore stabilize the exchange rate.
Moses Igbrude, the National Coordinator-elect of the Independent Shareholders Association of Nigeria, said the naira has been consistently depreciating against the dollar over the years, but politics will play a role this year.