Nigeria’s currency may face a “gradual depreciation” of as much as 15 percent this year with the naira coming under pressure as the Federal Reserve reduces its asset purchase program, said United Bank for Africa Plc (UBA) Chief Executive Officer Phillips Oduoza.
While Nigeria’s foreign reserves have slowed their depletion this year there is “very, very huge demand for foreign exchange arising probably from the tapering of the quantitative easing in the United States,” he said in an interview yesterday at the World Economic Forum in Abuja, Nigeria’s capital. “It could happen any moment from now, there is so much pressure on the local currency.”
Oduoza joins executives from Africa’s biggest phone company MTN Group Ltd. who said the country’s central bank may need to lower the naira’s target peg of a range of 3 percentage points around 155 per dollar. Andrew Bing, the chief financial officer of MTN’s Nigerian unit, said in a May 5 interview that the currency will probably be devalued after next year’s election because of lower than forecast oil exports from the continent’s biggest producer.
Nigeria’s foreign-exchange reserves declined 13 percent this year to $38 billion by May 5 as the central bank sold dollars to prop up the naira and as oil production missed estimates. Godwin Emefiele, who becomes the institution’s governor in June, told the Senate in March that a devaluation of the naira is “not an option” and would be “devastating” for the economy.
“It may happen and probably the market may force that,” said Oduoza.
The naira gained 0.6 percent to 160.95 per dollar as of 7:35 p.m. yesterday in Lagos. That pared losses in the currency of Africa's largest economy to 0.4 percent after falling 2.6 percent in 2013.
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