The research by leading Emerging Markets & Frontiers investment bank,
The report was released after the company's 5th Annual
Sanusi said he believes
According to the RenCap report, "forex reserves would have to drop significantly for the new CBN governor to devalue the naira". The investment firm noted that the last time naira was devalued was in 2011 following an
RenCap forecasts an
Foreign exchange reserves is expected to decline further in 2014, with sub-par oil production, higher imports due to election-related spending coming ahead of the 2015 general elections in the country.
Oil revenues dropped in 2013 due to oil theft and illegal bunkering activities in the country. The decline in forex reserves had since continued following a post-global crisis peak of
With a weak external position in 2013 and 2014, devaluation in 2015 becomes apparent. The devaluation is expected however after the 2015 elections as RenCap noted that "a devaluation before the elections would be unpopular for an import-dependent nation".
However, while the government may get more from tax revenue, importation becomes more expensive and with the poor state of the country's oil refineries, it seems doomed to losing money via oil importation.
Despite Nigeria’s insistence on lowering imports in certain sectors, local production remains inadequate to meet domestic consumption. With devaluation expected to increase importation costs, the country might struggle to maintain a healthy trade balance, which could lead to greater external borrowing and higher inflation.
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