Following the inauguration of the new administration, the naira may be devalued again to reflect the recent drop in Nigeria’s foreign reserves, analysts at Renaissance Capital have said.


The analysts said this in a report, ‘Nigeria beyond May 29: Managing expectations,’ which was made available to our correspondent on Friday.

The analysts, however, noted that the Central Bank of Nigeria was likely to move back toward a ‘managed float versus the managed peg’ of recent months.

They said, “Post-inauguration, we think the naira – which has essentially been pegged at N199/$1 since the mid-February devaluation – will be devalued, to reflect the $4.5bn fall in FX reserves since the February devaluation.”

Noting that a weaker naira implied a build-up of inflationary pressures, they observed, “We see inflation breaching the central bank’s inflation target band of six to nine per cent and entering double-digits in Q3 2015. This rules out any prospect of monetary easing in 2015, in our view.”

They explained that the devaluation might be smaller than the market projects (1015 per cent), because authorities seemed to be focused on medium-term fundamentals, which they expect would turn in favour of the naira, primarily through a fall in import demand – particularly of agriculture products (via continued improvement in production) and fuel imports (due to 650kb/d of fuel coming onstream from Dangote’s refinery), which account for 60 per cent of forex usage.

The risk to this view, according to them, is that the All Progressives Congress comes in with a macro policy that requires a much weaker naira, i.e. an export-led growth policy.

The RenCap analysts also reviewed the fiscal crisis in the country and the challenge it would pose to the new government.

“Given that the incoming administration will be substantially resource-constrained, we think Buhari’s biggest challenge will be managing expectations,” they said, adding that the oil sector was expected to be the primary focus of Buhari’s crackdown on graft; in particular, reforms related to the fuel subsidy, repatriation of oil money and refineries.

Stressing that, as things stand, the government was experiencing a significant cash crunch, whereby it could do little beyond paying salaries, they said they expected capex spend in 2015 to be negligible with debt to play a much bigger role in financing the budget than it had in recent years.

They added, “As we expect the financing gap to be at least double the FY15 target of 1.1 per cent of GDP, due to optimistic revenue assumptions and slower growth, we believe the incoming administration is apt to seek larger loans from the DFIs. Given the revenue constraint, we think the incoming administration will continue to wind down some companies’ pioneer status, so they can start paying taxes, and reduce the number of authorities that can grant pioneer status, to slow the awarding of tax exemptions.”

Source:http://nairausd..com/2015/06/naira-may-be-devalued-again-report.html

Am just observing

orobs93:
Am just observing

Na so we see am.

Kai my people.

Na wetin dey do naira self

POPdecorator:
Na wetin dey do naira self

It our fault bro,blame no one.

Is it actually devalued or it is that reality is kicking in?

woodcook:
Is it actually devalued or it is that reality is kicking in?

It was devalued during the oil crisis to prevent the collapsed of the economy.

But as of now due to lack of fund,it may be devalued further.

Be alart

Visit nairausd..com to keep you informed always

I don't belivit.!

Chiaka:
I don't belivit.!

Real doubting THOMAS

Chiaka:
I don't belivit.!

Subsidy Removal’ll Reduce Pressure On Naira — FDC

http://nairausd..com/2015/06/subsidy-removalll-reduce-pressure-on.ht