Economic and currency experts have expressed divergent views over the outlook of the naira this year.
While some said the naira would experience further decline at the parallel market this year, others said the volatility noticed in the exchange rate last year could not continue this year.
They spoke during separate interviews with our correspondent on Monday.
“We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
According to Ezun, the naira will continue to depreciate at the parallel market while the Central Bank of Nigeria will keep managing the official rate around 305/dollar.
“It will depreciate further but there has been some resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity,” the Ecobank analyst added.
For a director at Union Capital Markets, Mr. Egie Akpata, the direction of the naira-dollar exchange rate this year will be determined by the CBN’s policies, oil output and price.
He said, “A lot depends on what the CBN does because exchange rate is driven by the kind of administrative management in place at the forex market. The direction of the oil price and output this year will also determine which way the exchange rate will go.”
An economic analyst at EY, Mr. Bisi Sanda, believes most economic indicators are moving in the direction that is favourable to the country.
He, however, said that unless the economic and forex managers used this to the country’s advantage, the naira and the economy in general would be thrown into further chaos.
Sanda said, “Everything depends on what the Federal Government decides to do. For example, we don’t need more than 3000 Bureau De Change Operators in this country, and the CBN does not need to allocate forex to them.
“The leakages that have characterised forex management in the country is the reason for the current volatility in the exchange rate. The oil output and price are now going in the directions that are favourable to us. So we should take advantage of this.”
The Chief Executive Officer of Financial Derivatives Limited, Mr. Bismarck Rewane, said a further decline in the value of the naira was likely this year but noted that this might not be too significant.
He believes there is a need for the central bank to overhaul the forex market to enable forces of demand to determine the exchange rate.
He said, “What you are seeing today is symptoms of mis-allotment of the currency because of the structure of the market and the process which the foreign exchange market is operating. You will see that the rate of depreciation of the currency (naira) has actually slowed; so I don’t think it can depreciate to that level (N700/dollar). If there is a catastrophe, yes it is possible. But is that likely? It is very unlikely to happen.
“But more than anything else, the current state of the forex market in Nigeria must be reformed and completely overhauled. If you don’t do that, no matter what happens, you are not going to get the results you want.”