CBN may be forced to devalue naira – GTBank

The Central Bank of Nigeria (CBN) might be compelled to devalue the naira if oil price declines further and stays below current levels for a protracted period of time, Guaranty Trust Bank said in a forecast.
The apex bank has rebuffed local and international pressure to devalue the naira but pan-African lender, GT Bank, said it believes the CBN’s stance might not hold on for the entire year given the forecast that oil prices are set to fall  below present levels, which would result in further decline of external reserves.CBN

Detailing its economic expectations for 2016 after a holistic review of the Nigerian macroeconomic landscape, the bank in a report released over the weekend said it expects to see inflation trend slightly above 10 percent in the first half of 2016 as the CBN’s target to keep inflation at single digit is not sustainable.
Despite the role the ambitious reform agenda and policy direction of the new administration will play in restoring confidence to the economy, the bank said it expects economic growth to remain relatively low in the first half but gradually pick up in the second half of the year.
“The country’s external reserves which stood at $34.47bn as at December 31st, 2014 declined by $5.40bn (15.67%) to close the 2015 financial year at $29.07bn on December 31st, 2015.
With the price of oil, which accounts for more than 90% of the country’s exports, hovering around $28 per barrel in January 2016 and backlogs of unmet FX demand, we expect further depletion of the reserves in 2016,” the bank said.



February 15, 2016
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