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2023 Election May Force CBN To Devalue Naira —- Rewane

The Chief Executive Officer of Financial Derivatives Company, Mr. Bismarck Rewane, is projecting that the Central Bank of Nigeria will devalue the naira along the parallel market rate which may settle at N565 against the dollar by the end of 2022.

The FDC boss stated that spending on political campaign ahead of the 2023 general election will put more pressure on foreign exchange supply in the Nigerian economy.

Rewane said this at the Nigeria Economic Outlook 2022, hosted by First Bank of Nigeria.

The fate of the naira has been tipped by multilateral lenders as one of the critical issues that will reshape the economy in 2022, especially with a devaluation of the currency being the best option for the apex bank.

Godwin Emefiele, the CBN Governor inherited a naira that traded at N155.73 on June 3, 2014, but has lost value to N414.79 as of January 2022.

At the parallel market, the currency is currently trading around N570/$.

But Rewane argued that by the end of the first quarter, the naira will depreciate to N560 against the US dollars, while it will trade at N550 and N555 in Q2 and Q3, respectively.

He said, “Political jitters would heighten forex pressures in the fourth quarter. The CBN is expected to step up efforts towards exchange rate convergence. Another currency adjustment in 2022 will bring the official and parallel market rates closer.

“Converted floating exchange rate, I think so, the Central Bank is going to have to do that. And they will have to increase the suspended tariff side.

“If they are able to do that, then we are likely to achieve what we call legacy, what we call more of a dynamic equilibrium.

“Fiscal deficit will decline. The MPC will increase interest rate sharply before the middle of the year as a way to curb inflation. Deficit financing will be funded because of subsidy removal.

“External reserves will go down to $30bn coming out to support the currency and the exchange rate deferential will drop from all the way and began to converge.”

He projected that the external reserves will deplete to $39bn by the end of 2022.

According to him, robust demand due to festive season and sustained election spending will help the economy to grow by 3.9 per cent by the end of the year.

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