Responders to the Central Bank of Nigeria (CBN) Business Expectation Survey for October 2024 expect that the Naira will continue to depreciate in the coming months but appreciate in six months. The naira exchange rate to the US dollar hovered between N1650 to N1700 in the period.
The latest naira volatility started in June 2023. Since then, the naira’s official rate has dropped in value from $1 = N450 to its current level of nearly $1= N1650. The rapid decline in the value of the Naira over the past year has caused significant challenges to businesses and industries. The chart below shows how the Naira has evolved against the dollar over the last 10 years. When the parallel rates widened greatly from the official rate and then government policy needed to stabilize the currency.
While the naira volatility had been significant, the CBN, under the leadership of Olayemi Cardoso has been able to achieve convergence. Be elimination the gap between the official and street rates, the CBN has improved the confidence in the currency, eliminated distortions, and plugged arbitrage and corruption holes previously rife in the market.
Figure 1 Naira Exchange Rate to the US Dollar Jan 2014 to July 2024.
The survey also shows that businesses in the services sector are the most optimistic while businesses in the manufacturing sector have negative expectations, followed agriculture and construction. The survey also show that optimism was higher ahead for the next six months, in line with the expectations that the Naira will firm up then.
The confidence Index on the macroeconomy was 21.8 for the next six months, 14.5 for the next three months, 4.8 for the next month, and 1.4 for the current month (October), reflecting a stronger economic outlook for the second quarter of next year. Not surprising, agriculture sector indicates highest expansion plans for November given it is harvest season, while the optimism for October is attributed to agriculture and service sectors.
Notwithstanding the stronger outlook for the second quarter of next year and optimism by some sectors in the coming months, the survey shows that the top six business constraints are high interest rates, insecurity, high multiple taxes, inadequate power supply, unfavourable climate changes, and financial problems.
