Independent tax and business advisory firm, Andersen, has stated that demand pressure will affect the exchange rate in the black market in 2023.
The advisory firm said various factors will push up the parallel rate of the Naira to N900/$1, indicating the Nigerian currency will remain weak.
It said portfolio investors snubbing Nigeria for other active global interest rates is one of the factors that will affect parallel rates, as well as its import-dependent economy.
This was stated in a report titled ‘Nigeria’s 2023 economic outlook’. Andersen also listed currency speculations as a factor that will impact the rate in the Bureau De Change window of the black market.
“In 2022, the value of the naira was relatively more stable in the official market than in the parallel market thereby widening the premium between the two exchange rate windows. This was due to the heightened demand pressure spurred by FX illiquidity.
“FX excess demand pressure is expected to continue in 2023 fuelled by varying factors such as elevated global interest rates attracting portfolio investments away from Nigeria; a structurally import-dependent economy; currency speculations if the gap between official and parallel market rates are not closed; etc, which will make the naira to remain pressured in the foreign exchange windows,” Andersen wrote in the report.
Andersen also explained that if the gap between the official and black markets remains, the exchange rate in the former will rise to N500/$1, while that of the latter will reach N900/$1.
“Based on this, should the CBN continue to maintain the gap, the official rate is likely to be devalued to about N500/$, while the parallel market rate depreciates to about N900/$ by the end of 2023 unless mitigating measures are taken.”
Recall that Prime Business Africa previously reported that Fitch disclosed the Naira scarcity will increase demand for Dollars in the foreign exchange market.
“the demonetisation drive is still likely to be disruptive in the near term. Associated cash shortages may hit consumer spending and boost demand for foreign currency, aggravating foreign-exchange shortages,” the report reads.