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Nigerian firms expect naira to depreciate before recovery in 2025

GrafaGrafa2024/08/24 07:15
By:Isaac Francis

A recent survey conducted by the Central Bank of Nigeria (CBN) indicates that Nigerian businesses anticipate further depreciation of the naira before a potential recovery in late 2024 or early 2025. 

The CBN's Business Expectation Survey, which gathered responses from over 1,600 Nigerian enterprises, reveals that despite the central bank's efforts to stabilise the currency by injecting millions of dollars into the forex market, businesses remain pessimistic about the naira's immediate prospects.

Since the start of the year, the naira has depreciated by nearly 70%, exacerbating inflationary pressures in the country. 

The survey respondents predict that the naira will continue to weaken in the coming months, with depreciation expected to persist through July, August, and the following three months. 

However, they also foresee a potential turnaround starting in late December or early 2025, with a gradual appreciation continuing for about six months thereafter.

The ongoing decline of the naira has had significant economic repercussions, including driving Nigeria's inflation rate to 34.19% in June 2024. 

This sharp rise in inflation has led to a decline in living standards, prompting protests across the country. 

The protests have reportedly resulted in the deaths of 17 people, highlighting the severe impact of the naira's depreciation on the general population. 

A majority of survey respondents, including many large firms, view the current inflation rate as alarmingly high.

Despite the grim outlook for the naira in the short term, many businesses maintain a positive overall outlook. 

The survey suggests that firms are optimistic about business activities in the near future, particularly in the agriculture, industry, and services sectors, which are expected to see improved employment prospects. 

However, respondents also identified key challenges, including Nigeria's insecurity, high interest rates, insufficient power supply, and high or multiple taxes, as significant obstacles to business growth in July 2024.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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