By Seun Adeuyi
The Central Bank of Nigeria (CBN) has disclosed the naira is expected to depreciate further in January 2021.
The CBN in a survey carried out by its Statistics Department titled, ‘December 2020 Business Expectations Survey Report’ revealed that there might also be a steady rise in interest rate from December till the next six months.
In recent weeks, the naira witnessed a sharp fall reaching its lowest on November 30, 2020, when it exchanged for N500/$1. Since then, the dollar has been hovering between N460 and N470.
Recall that the Nigerian economy had on November 21 slid into its second recession in five years when the economy shrank again in the third quarter. According to the data obtained from the World Bank, the recession is said to be the worst in 36 years. Some economists had expressed optimism that the country would exit the recession in 2021.
In the survey, the CBN said it conducted the survey online from December 7 to 11, with a sample size of 1,050 businesses nationwide.
The Apex bank noted that a response rate of 91.3 per cent was achieved and that the sample covered the agriculture/services, manufacturing, wholesale/retail trade and construction sectors.
“Respondent firms expect the naira to depreciate in the current month and next month but appreciate in the next two months and the next six months.
“Inflation level is expected to rise in the next six and 12 months as firms expect the average inflation rate in the next six months and the next 12 months to stand at 13.24 and 14.51 per cent, while borrowing rate is expected to rise in the current month, next month, next two months and the next six months with indices of 19.2, 14.9, 14.7 and 14.3 points,” the report read partly.
It explained that respondent firms identified insufficient power supply, unfavourable economic climate, lack of materials input, competition, unclear economic laws, financial problems, unfavourable political climate, access to credit, insufficient demand, lack of equipment, labour problems and high interest rates, as major factors constraining business activities in December 2020.