Naira projected to depreciate further, crosses N780/$1 mark

The World Bank Group in its latest commodity markets outlook released at the weekend has projected that the Naira will depreciate further by 20 per cent before the end of the year.

The naira exchanges at N438/$ at the official market, and above N780/$ at the parallel market.

The latest shrink in the value of the Naira came after the Central Bank of Nigeria announced its intention to redesign Naira notes, creating a huge demand in the forex exchange market.

The CBN had last week announced its move to redesign the N200, N500 and N1000, adding that the new design and issues will be effective from mid-December 2022.

The news of the naira notes redesign had elicited public debates, with the majority of views suggesting that it would cause more harm to the economy.

The CBN said the decision to redesign the notes was due to several challenges which threatened the currency, adding that the bank’s top priority is to “safeguard the integrity of the local legal tender”.

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This huge demand has depreciated Naira further at the parallel market as more persons look to buy dollars to exchange their stashed naira notes.

Meanwhile, a former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu while commending the move by the apex bank to redesign Naira notes, warned that it may not solve rising inflation in the country.

Speaking on the development, Moghalu said he supports the decision of the bank, noting that If 80 percent of banknotes in circulation are outside the banks, it is really troubling.

“The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.

“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel forex market to buy hard currency, putting further downward pressure on the value of the naira as too much naira will be chasing too few dollars.”

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“I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation,” he added.