Nigeria naira will suffer further devaluation says the new report from MTEF
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According to the information provided by the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report as released by the Federal Ministry of Finance, Budget, and National Planning, the exchange rate between the naira and the dollar may be further devalued.
“The official exchange rate has also been adjusted upwards to N360/US$1 by the Central Bank of Nigeria (CBN).
“At the Importers & Exporters Foreign Exchange (IEFX) window, where the bulk of foreign exchange transactions are consummated, the exchange rate recently depreciated from about N362/US$1 in January 2020 to over N385/US$1.
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“While the CBN continues to make strenuous efforts to stabilize the exchange rate, it is generally expected that the Naira will suffer further devaluation as Nigeria is projected to lose about US$26 billion in oil revenues, its principal source of foreign currency,” MTEF
This means that the government reluctantly admits that Naira could see another devaluation soon. The black market rate has averaged N445/$1 while the I&E window trades at about N390/$1. Same goes with the Bitcoin market at 445/$1 at press time.
Nigeria had recorded a drop in the revenue generated from the oil market. There was a 30 percent drop in the first quarter of the year 2020.
The total oil revenue was at N464 million, representing a shortfall compared to N659 million budgeted in the same period.
The actual receipt for non-oil revenue was N269 billion which represents a 40 percent drop compared to the previous receipts. Nigeria spends near 99 percent of its revenue on debt service.
Now that the government is under pressure to earn dollars, the focus now has moved to foreign borrowing.
The government has of recent requested and borrowed near $8.9 billion in new loans. It is also important to note that naira devaluation equals growth in government revenues which is another incentive to consider devaluing.
The Bitcoin market in Nigeria equally gets affected by the current naira devaluation because Bitcoin is sold considering its worth in dollar value to naira.
Most speculators believe that with a proper shift to another source of revenue, the value of naira at the market will increase against dollar.
Else, a constant pressure for dollar on the government might force another devaluation as dollar inflows remain dampened.
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