Naira expected to depreciate in short term, improve in 6 months, says CBN

Businesses in Nigeria anticipate further depreciation of the Naira over the next three months starting from July, with an expected appreciation after six months, according to the Central Bank of Nigeria (CBN) Business Expectation Survey for July.

The survey, published by the CBN’s statistical department, shows improved business confidence in July compared to June, driven largely by the agricultural sector.

Respondents expressed optimism about business activity and employment prospects for the next one to six months, with agriculture expected to offer the highest employment opportunities, followed by the industry and services sectors.

However, businesses expect the exchange rate to weaken in the short term, before strengthening in six months.

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The report indicates, “Respondent firms expect the naira to depreciate in the current month, next month, and next three months but appreciate in the next six months as their indices stood at -22.6 points, -16.5 points, -4.8 points, and 13.7 points respectively.”

Respondents also anticipate an increase in borrowing rates across all periods under review and view the current inflation rate of 34.19% as excessively high. The inflation sentiment was strongest among large firms, scoring 72.8 points.

The business community’s outlook on the foreign exchange market is influenced by the recent depreciation of the Naira, which has dropped close to N1,600/$ despite CBN interventions.

Respondents remain positive about business expansion and job creation across all sectors in August 2024, with agriculture showing the highest potential for growth.