The nation’s official exchange rate may fall to N430 to the dollar by the end of 2020, United Capital Plc, a pan-African investment banking and financial services group, said on Tuesday.
The firm, in its economic forecast for the second half of the year, titled, “Nigeria H2 2020 outlook report: Up in the air,” analysed the state of the Nigerian economy and outlined future projections informed by domestic and global events.
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.”
It said what could have been a flourishing year for the Nigerian economy was caught in the web of a global public health crisis, which grounded domestic and external economic activities.
The report noted that domestic economic growth in the first quarter of 2020 slowed to 1.87 per cent.
It said the GDP figure for Q2 2020 was set to come in negative despite the series of stimulus packages by the authorities aimed at easing the impact of the coronavirus pandemic on businesses and households.
According to the report, since the current crisis is supply-side heavy (restriction of movement and business shutdown), the demand-side responses by both the fiscal and monetary authorities (liquidity injections) will not be enough to prevent an economic contraction in the short term.
It said, “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.”
United Capital said it had lowered its real GDP growth forecast for 2020 from 2.3 per cent to -2.69 per cent.
“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.