Following the decline in export receipts from oil and other activities of the Bureau De Change operators owing to the COVID-19 pandemic more pressure has been put on the economy and on the Naira.
This was contained in the CBN report on ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.
The Naira’s value had plunged exchanging on Monday at 465/$ in the parallel market while it exchanged at 460/$ on Thursday.
The Naira had earlier exchanged at 430/$ after the CBN begun forex sales to the BDCs earlier in September.
In response to the COVID-19 pandemic, the CBN sai, the viability of the external sector in 2020 was expected to deteriorate. This is due to the present worsening current account balance and depletion of external reserves driven, largely, by decelerating export receipts, particularly oil.
The apex bank further added that the degree of external reserves accumulation was expected to decelerate as outflows were expected to outweigh inflows.
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So, external reserves are expected to remain between $29.9bn and $34.3bn at end-December 2020 (predicated on current declining oil price between $20 and $40).
“This development, in addition to exchange market pressures, emanating from speculative activities in the BDC and I & E segments of foreign exchange market, is expected to exert pressure on the naira exchange rate,” it stated.
In addition, the bank pointed out that increased risk aversion behaviour by investors may negatively impact on capital inflow as they flee to safe-haven assets.
The CBN finally projected that the fiscal space may be limited in 2020, given escalated vulnerability, as a result of sharp decline in oil prices, occasioned by weak global oil demand and price wars between Russia and Saudi Arabia.