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American Bank Predicts Devaluation Of Naira By 20% In 2023

The Bank of America has revealed that Nigeria’s local currency unit, Naira is set to weaken further next year as its current exchange rate to the dollar is well above fair value.

According to a report by Bloomberg, economist Tatonga Rusike said in a note to clients on Tuesday that, “three indicators, the widely-used black-market rate, the central bank’s real effective exchange rate, and our own currency fair value analysis shows the naira is 20 per cent overvalued.

“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”

The bank said that the devaluation of the Naira which is due to limited government external borrowing is unlikely to happen until after the February 2023 presidential elections.

According to the bureau de change operators, the naira exchange went up from 440.95 to the dollar in the official spot to N740 in the parallel market.

The official rate has depreciated by less than 10 per cent since December 2021 even as the parallel rate is down by nearly a third within the same period, widening the gap to almost 70 per cent, BofA analysis shows.

“The greater the disparity with the official market, the higher the likelihood of increasing excess demand for foreign currency on the parallel market,” the bank said.

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