CBN will depreciate naira by 5.3%, says Cordros Capital

An investment management firm, Cordros Capital Limited, has said the Central Bank of Nigeria is expected to depreciate the naira by 5.3 percent to N400 against the dollar in the interbank market.

It noted that Nigeria’s foreign exchange reserves sustained their descent, as it dipped by $177.39 million week-on-week to $35.58 billion as of February 16, 2021).

The naira weakened against the US dollar by 1.3 percent to N410.00/$1 at the Investors’ & Exporters’ window and by 1.1 percent to N478.00/$1 in the parallel market, the Cordros Capital analysts said in a note on Friday.

The analysts said, “At the I&E window, total turnover (as of 18th February 2021) decreased by 51.3 percent week-to-date to $162.14 million, with most trades consummated within the N390.00 – 424.15/$1 band. In the Forwards market, the rate weakened across the 1-month (-1.5 percent to N413.96/$1), 3-month (-1.4 percent to N421.12/$1), 6-month (-1.0 percent to N429.29/$1) and 1-year (-0.3 percent to N443.14/$1) contracts.

“Given the expected pressure on the external reserves amid weak portfolio inflows, we expect the naira to depreciate closer to its fair value implied by the long-run REER (N453.67) in the medium term. Our baseline expectation is that the CBN will depreciate the naira by 5.3 percent to N400/$1 in the interbank market and 5.1 percent to N415/$1 at the IEW.”