CBN: Firms expect naira to depreciate further in January

Firms expect the naira to fall deeper in January 2021, according to a new report by the Central Bank of Nigeria (CBN).

This was contained in the apex bank’s statistics department report titled, “December 2020 Business Expectations Survey Report”.

The naira had weakened at N500 to $1 in the parallel market after the CBN adjusted the rate across foreign exchange market segments.

On Friday, the naira exchanged at N465 to $1 dollar in the parallel market.

From December 7-11, CBN conducted an online survey for 1050 businesses nationwide, with a response rate of 91.3 percent.

It said the respondent firms covered a wide range of sectors such as agriculture /services sector, manufacturing, wholesale/retail trade and construction.

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

“Respondent firms expect the Naira to depreciate in the current month and next month but appreciate in the next 2 months and next 6 months,” the report read in part.

“Inflation level is expected to rise in the next 6 and 12 months, while borrowing rate is expected to rise in the current month, next month, next 2 months and the next 6 months.”

The report showed that the agric/services sector with (20.5 points) has the highest prospect for employment in January, followed by construction sector with an index of 17.9 points, manufacturing sector (16.7 points) and wholesale/retail trade (13.4 points).

In the survey, majority of respondent firms were dissatisfied with the management of inflation by the government with a negative net satisfaction index of -33.5.

Firms projected the average inflation rate in the next six months and the next twelve months to stand at 13.24 and 14.51 percent, respectively.

According to the report, respondents listed 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 hindering business activity in December.

Also, firms had a positive outlook on business activity, average capacity utilization, volume of total order, and financial condition(working capital), but expressed pessimism on the macro economy.