The naira exchanged at 440.95 to the dollar in the official spot while parallel rate went up to N740.
Despite the grievances of Nigerians, Bank of America predicts that the local currency will continue to decline in value over the coming year since the present dollar conversion rate is far higher than it should be.
An economist named Tatonga Rusike reportedly stated in a note to clients on Tuesday that “three indicators, the commonly utilized black-market rate, the central bank’s genuine effective exchange rate, and our own currency fair value research reveals the naira is 20% overvalued.
“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”
While the naira will come under increasing pressure “due to limited government external borrowing,” devaluation is unlikely to happen until after the February 2023 presidential elections, the bank said.
Africa’s largest economy operates a multiple exchange regime dominated by a tightly controlled official exchange rate and a parallel market where the currency is freely traded.
“The greater the disparity with the official market, the higher the likelihood of increasing excess demand for foreign currency on the parallel market,” the bank said.
The naira exchanged at 440.95 to the dollar in the official spot while parallel rate went up to N740 today, according to the bureau de change operators.
The official rate has depreciated by less than 10 per cent since December 2021 even as the parallel rate is down by nearly a third within the same period, widening the gap to almost 70%, BofA analysis show.
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