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Why Naira May Depreciate In January 2021 – CBN

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By Chuks Ekpeneru

 A report by the Central Bank of Nigeria has revealed that the naira is expected to depreciate further in January 2021 and thereafter make steady appreciation in the next six months.

The CBN report said that the online survey was carried out by its Statistics Department from December 7 to 11, with a sample size of 1,050 businesses nationwide.

The 11-page survey report, titled, ‘December 2020 Business Expectations Survey Report’ added that there might also be a steady rise in interest rate from December till the next six months.

It noted that a response rate of 91.3 per cent was achieved and that the sample covered the agriculture/services, manufacturing, wholesale/retail trade and construction sectors.

Respondent firms were made up of small, medium and large corporations covering both import-oriented and export-oriented businesses.

The report partly read, “Respondent firms expect the naira to depreciate in the current month and next month but appreciate in the next two months and the next six months.

“Inflation level is expected to rise in the next six and 12 months as firms expect the average inflation rate in the next six months and the next 12 months to stand at 13.24 and 14.51 per cent, while borrowing rate is expected to rise in the current month, next month, next two months and the next six months with indices of 19.2, 14.9, 14.7 and 14.3 points.”

In the survey, respondent firms expressed pessimism on the macro economy, while their outlook on the volume of business activities, average capacity utilisation, the volume of total order and financial condition (working capital) were positive.

The CBN stated that respondent firms identified insufficient power supply, unfavourable economic climate, competition, high interest rates, unclear economic laws, financial problems, unfavourable political climate, access to credit, insufficient demand, lack of equipment, lack of materials input, and labour problems as major factors constraining business activities in December 2020.

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