The Central Bank of Nigeria ( CBN) may devalue
the Naira again if the pressure on the currency
continues through the first half of 2015.
The pressure on the currency has been
sustained as falling oil prices and the general
elections intensifies.
In its report titled: Macroeconomic and Banking
Sector Themes for 2015, Nigeria's Guaranty
Trust Bank (GTB) wrote, "As pressure continues
to increase in the first half, we expect that the
CBN may consider another devaluation within a
range of N175-N180 per USD, as reserves and
oil prices continue to fall."
Last year November, the CBN devalued the
naira from N150 - N160 to one U.S dollar to
N160 - N176, as it struggles to preserve
macroeconomic stability. It also increased its
benchmark interest rate to a record high of 13
percent from 12 percent. But the conditions that
brought about the devaluation still exist and may
get worse in the coming months.
Oil prices have fallen to less than $45 per barrel
from over $100 in less than a year, and analysts
have predicted a further decline as the oil glut
which brought about the price crash has shown
no sign of ending soon.
Currencies of several emerging economies were
hit by the US Federal Reserve's tapering policy,
but currencies of oil-based economies such as
the naira and the Russian rouble have been hard
hit. "The commencement of normalisation of
monetary policy by the U.S. Federal Reserve…
has accentuated capital outflows," CBN
Governor, Godwin Emefiele said last November.
As at January 5, the CBN pegged the country's
forex reserve at $34.49 billion, a $20 million gain
over December, 2014's $34.47 billion. The apex
bank says rising internal demand for the dollar
had been exerting more pressure on the foreign
exchange market. This is expected to continue
until after the general elections in February.
When the new CBN governor assumed office
last year, he promised to gradually reduce
interest rates. "We shall pursue a gradual
reduction in interest rates," he had said in his
presentation.
However, the forces, that necessitated the
devaluation of the Naira also necessitated a
hike in interest rate. The CBN thus raised its
benchmark interest rate by 100 basis points to
13 percent. GTBank however expects it to
further increase it by 50 – 100 basis points.
According to the bank, a combination of reduced
liquidity in banks, rising costs of funding,
continued pressure on the Naira and rising yields
in fixed income investments will compel banks
to hike lending rates. Lending rates, it predicts,
may end up rising by as high as 100 – 200
basis points.
As at last year September, inflation was pegged
at 8.3 percent, but despite the devaluation of
the Naira in November, last year ended with
inflation actually reversing to 8 percent.
The rate averaged 12.29 percent from 1996 until
2014, reaching an all time high of 47.56 percent
in January of 1996 and a record low of -2.49
percent in January of 2000, according to Trading
Economics. GTBank, Nigeria's third largest bank,
however expects inflation to pick-up to low
double digits by the middle of the year.
The GTBank wants the CBN to show a more
proactive stance this year. Policies fostering
currency stability, economic improvement and
the continued development of growth sectors
are expected of the apex bank, as there is a
limit to what can be achieved solely through
monetary policy.


http://pulse.ng/tech/cbn-apex-bank-may-devalue-naira-again-id3430969.html

Africa My Africa!

We surely can't continue like this....we need CHANGE

e no easy ooo