Naira may devalue by 20% in 2023 – BoA

Nigeria’s local currency unit is set to weaken further next year as its current exchange rate to the dollar is well above fair value, according to Bank of America.

According to a report by Bloomberg, economist Tatonga Rusike said in a note to clients on Tuesday that, “three indicators, the widely-used black-market rate, the central bank’s real effective exchange rate, and our own currency fair value analysis shows the naira is 20 per cent overvalued.

“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”

While the naira will come under increasing pressure “due to limited government external borrowing,” devaluation is unlikely to happen until after the February 2023 presidential elections, the bank said.

The naira exchanged at 440.95 to the dollar in the official spot while parallel rate went up to N740, according to the bureau de change operators.