Although Nigeria has enjoyed a relatively long period of exchange rate stability in recent times and the Central Bank of Nigeria (CBN) has shown that it is ready to take whatever measures that are necessary to defend the naira, the local currency will depreciate to N400/$ by 2022, multinational professional services network, Deloitte has predicted.
The firm stated this in its July “Invest in Nigeria Country Report” obtained by New Telegraph.
According to Deloitte, the naira’s exchange rate to the dollar had converged at around N360/$ at both the parallel and official markets by the middle of this year due to the CBN’s frequent injections of the greenback into the forex market coupled with forex liberalisation measures introduced by the apex bank.
It, however, stated: “Analysts estimate that the naira will continue to depreciate due to the global economic slowdown (most notable in China and the US), and the upcoming Nigerian election in 2019.However, by 2022 it is expected that the official rate and the parallel market rate will remain convergent at just over N400 per dollar.”
Similarly, the firm forecast that although Nigeria’s inflation has been steadily declining in recent times, the CBN is unlikely to achieve its target range of 6% to 9% inflation as a result of the impact of pre election spending and efforts by the government to replace food imports with more expensive local produce.
Specifically, the experts said: “The CBN follows an inflation targeting policy with a target range of 6% to 9%. However, due to supply factors and the sharp depreciation of the naira in recent years, Nigeria’s inflation exceeded the upper end of the target range in early 2016, peaking at over 18% in the last quarter of that year.
“Analysts predict that current measures taken by the central bank and a more positive economic outlook will lead to consumer price inflation easing. However, stubbornly high food prices, partly due to attempts to replace food imports with costly local produce, and an increase in government spending in the run-up to the 2019 presidential elections, are likely to keep inflation above the target range during the short to medium term.”
Despite naira depreciation and inflation risks, Deloitte noted : “The combination of higher oil revenues and positive policy decisions has rekindled Nigeria’s economic prospects. Due to policy changes and the recovery in the oil sector, Capital Inflows (FDI, portfolio and other investment) reached $12billion in 2017, more than doubled that of the previous year.”
It, however, pointed out that Nigeria’s lending rate is high compared to other countries across the continent due to a shortage of liquidity in the financial sector.
“This shortage is partly the result of the central bank’s intervention in the currency market in order to stabilise the exchange rate,” the international professional services group said.
“High rates hamper long-term business prospects in the non-oil sector as small businesses are discouraged from borrowing to grow their businesses.

The New Telegraph