In a bulletin containing the FDC’s economic outlook for 2017 released on Wednesday, Rewane predicted that the naira would trade at N350/dollar at the Interbank Foreign Exchange Market and depreciate to N520/$ at the parallel market.
He also forecast that inflation would slow down this year to between 15 per cent and 17 per cent, after spiking towards 20 per cent.
The expert, however, noted that things might get worse if the Federal Government failed to overhaul the forex market, reduce benchmark interest rate, introduce supplementary budget, and engage the Niger Delta militants to restore oil production to two million barrels per day.
Rewane said, “2016 was a year like no other. Five most unlikely events occurred including the coincidental death of George Michael on Christmas Day and the naira testing N500/dollar in the parallel market. The average Nigerian had nothing to cheer and felt it was a year in which he was economically raped, no thanks to a recession and a flawed forex market.
“2017 is looking slightly better with projections of positive growth of 1.2 per cent. This will happen only upon three conditions: Engagement in the Niger Delta to bring production back up to 2mbpd; reduction in interest rates and an increased supplementary budget; and an overhaul of the forex market to ensure transparency, liquidity and price efficiency.”
Speaking in the same vein, an economic analyst at Afrinvest, a Nigeria-based research and investment advisory firm, Mr. Wale Olusi, said the planned interest rate increases by the United States Federal Reserve Bank would lead to a stronger dollar.
He, therefore, said that unless the Central Bank of Nigeria reviewed its forex policy thrust, the naira might suffer further deprecation against the greenback owing to increased pressure on the local unit.
Olusi said, “The US Federal Reserve Bank has made known its intention to increase interest rate. We see a stronger dollar coming from a higher interest rate environment. If the CBN continues with its exchange rate policy thrust and the Presidency keeps fighting devaluation, we see the naira declining further above 500 to something near 520 this year.”
The Afrinvest expert, however, said the country had some indicators moving in its favour this year, adding that there was the need to take advantage of the situation.
“We see oil price and production output going up this year. This is good for the country and we need to take the advantage,” he added.
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 would not continue this year.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said the naira would continue to depreciate at the parallel market while the CBN would keep managing the official rate around 305/dollar.
He said, “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.
“It will depreciate further but there has been a resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity.”
Punch
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