Naira Foreign Exchange Rate to US Dollar to Decline to N430 in 2020

United Capital Plc, a pan-African investment banking and financial services group, on Tuesday said the nation’s official foreign exchange rate may decline to N430 in 2020.

This was after the Central Bank of Nigeria adjusted the Naira exchange rate to a US dollar from N360 to N380 to better accommodate the changes in macroeconomic fundamentals in recent months.

In the company’s economic projection for the second half of the year, titled ‘Nigeria H2 2020 outlook report: Up in the air,’ it said “On the exchange rate, we believe the odds are in favour of a further naira adjustment, which may take the official rate to N410/$ to N430/$ by year-end.

“However, we believe the Central Bank of Nigeria will continue to defend the value of the local unit for as long as it can.”

The report stated that the nation’s growth rate slowed to 1.87 percent in the first quarter of the year, partially reflecting the impacts of COVID-19.

It explained that despite the series of stimulus pumped into the economy by the Federal Government, the second quarter Gross Domestic Product (GDP) is expected to contract given the vast impact of COVID-19 on businesses and households.

It added, “However, the palliatives and reforms that are being announced may reduce the probability of sliding into a deep recession or quicken recovery once the incidence rate of the pandemic begins to drop and the economy is fully re-opened.

“Overall, the Nigerian economy may enter a technical recession by Q3 2020 (after two consecutive quarters of contraction in Q2 and Q3 2020), with a chance of early recovery by Q4 2020 or Q1 2021.”

The company, therefore, lowered its 2020 real GDP growth projection from 2.3 percent to -2.69 percent.

“The biggest downside risk to the above projections remains the possibility of a second round of lockdown, especially if the virus continues to spread rapidly,” it added.