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.”
While the naira will come under increasing pressure “due to
limited government external borrowing,” devaluation is unlikely to happen until
after the February 2023 presidential elections, the bank said.
Africa’s largest economy operates a multiple exchange regime
dominated by a tightly controlled official exchange rate and a parallel market
where the currency is freely traded.
The naira exchanged at 440.95 to the dollar in the official
spot while parallel rate went up to N740, according to the bureau de change
operators.
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 show.
“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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