Economic analysts have warned the Central Bank of Nigeria (CBN) that the rigid monetary policies implements will only devalue naira further.
The CEO of Agusto & Co, Bode Agusto expressed his displeasure towards policies implemented by the CBN during a webinar Monday titled: “Nigeria in 2022 – Will 2022 Be a Year of Strong Growth Driven by Herd Immunity from COVID-19?”
Agusto explained that a key solution to depressurizing the foreign exchange market is to resume the sale of dollars to Bureau De Change (BDC) operators, which the CBN has halted.
The CEO of Aguto & Co predicted that with the current policies implemented by the apex bank, including its cessation of forex sale to BDC’s will depreciate the value of Naira to N620/$1 in the parallel market before the end of the year. He further stressed another hindrance to Naira appreciation is the low level of liquidity in the parallel market.
His words “We see continued pressure on the parallel market exchange rates. And the only way to reduce pressure in the parallel market is to throw money thereby selling dollars to the BDCs. If there is no additional funding to the BDCs from the CBN then the parallel market rate will be between N610 and N620 in 2022. It will be fueled by scarcity and the difference between inflation rates of the dollar and the Naira.”
He also forecasted that rate convergence in the foreign exchange market will take a longer period of time with the CBN insistence of pegging the official exchange rate, the convergence making Nigeria have a single exchange rate with parallel market premium 3.0 per cent less that the official market.