NAIRA MAY WEAKEN N163 TO A DOLLAR IN 2014 —RENCAP

There are increasing fears that the Naira may likely come under intense pressure that will weaken the official exchange rate to about N163/$ from its benchmark of N155/$ as the year progresses.
The development, according to analysts at a private equity investment and research company Renaissance Capital(RenCap), would be as a result of continued oil theft, an increase in election-related imports and possibly looser monetary policy after a new central bank governor emerges.
The analysts believe that continued oil theft that has kept government revenue low since last year as well as expected increase in election-related imports are among economic issues that will impact negatively on the local currency.
“We forecast a weaker Naira of N163.8/$1 at Year End 2014. We think the depreciation risks to the currency include a smaller CA surplus owing to continued oil theft and an increase in election-related imports, possibly looser, post-Sanusi monetary policy and a pick-up in financial outflows as the elections approach” the RenCap analysts predicted.
RenCap expects markets in 2014, to become less forgiving about the financing of budget and current-account (CA) deficits, as the global economy adjusts to US Federal Reserve tapering.
On Sub-Saharan Africa (SSA), it stated, “we think countries hardest hit by tapering will be those with weak public and external exposure.
“ That said, we believe Nigeria’s appeal over Kenya’s will narrows, as Nigeria’s shine is dulled by poll-related fiscal laxity,” stated RenCap.
Meanwhile, the naira weakened for a fourth day after the Central Bank of Nigeria removed limits on how many dollars could be sold to foreign-exchange bureaus, driving demand for the U.S. currency.
Source: Tribune