Goldman Sachs Group, a leading global investment banking firm, has predicted that a major devaluation of the Naira is expected in about 18 months.
According to a Bloomberg Terminal report, Goldman Sachs stated that the devaluation will help bring about balance required to stabilize the currency. This was contained in an exclusive.
The Bloomberg report said:
Goldman Sachs Group Inc. this week said a significant devaluation of the naira is likely in 12 to 18 months to stabilize Nigeria’s external accounts. An exchange rate of 500-550 per dollar should bring about the desired balance…. compared with a current rate of about 407.
The Central Bank of Nigeria had on Thursday, August 6th, 2020, devalued the official exchange rate to N380/$1 from N360.1/$1, in what was considered a move towards unification of the multiple exchange rate windows
Meanwhile, the apex bank has made adjustments to the official exchange rate twice this year, with the first being from N307/$1 to N360/$1 before last week’s modification from N360/$1 to N380/$1.
However, the exchange rate trades between N388-N390 at the NAFEX market where the exchange rate is determined by market forces though turnover, although report says that activities remained thin.
Also, the SMIS window currently exchanges forex at N380.69/$1 and BDC segment N447/$1, while the parallel market exchange rate has reportedly averaged N475/$1 in recent times.
Reports further indicated that only $937 million was exchanged in July at the NAFEX market as against the $875 million in June.
Consequently, forex analysts suggest pent up demand for forex is between $1.5 billion to $5 billion some of which include dividends and investments waiting to be repatriated out of Nigeria, while the Godwin Emefiele, the Central Bank of Nigeria Governor, assured that the apex bank would live up to the demands when economic activities pick up in the country.