Nigeria’s authorities may soon devalue the naira but won’t fully relinquish control over it, instead taking steps to narrow the gap between the official and black market rates to boost confidence in the economy, a Reuters poll showed on Friday.
A shortage of dollars in Nigeria – for big and small needs including capital imports to the manufacturing process, travel and school fees – has led the black market to charge a higher premium in compensation for that scarcity in the official market.
A Reuters survey of 18 analysts taken in the past two days showed they are sceptical of the extent officials can fully liberalise the naira after it made dollars available on Monday to a few private individuals.
The poll suggests there is a 45 percent chance that the central bank will devalue the naira in coming weeks amid speculation that the government is stepping closer to liberalising it.
The central bank this week effectively devalued the naira for private individuals by offering them dollars at a rate of 366 naira, instead of the official 305 rate which it has held since last summer at the behest of President Muhammadu Buhari.
Still, the survey further suggested that if the naira were to be devalued, any float would still be managed as the central bank intervenes to keep it within desired levels.
“We don’t expect the authorities to ever fully relinquish control over the naira. A gap to the black market is a permanent feature,” said Philip Walker of the Economist Intelligence Unit.
“However, the size of this gap will come down over time as the market realities force the hand of the authorities and the naira is repeatedly devalued over time,” Walker added. Continued…
