Bank of America sees naira official rate falling to N520 to a dollar after 2023 election

The official market value of the Nigerian currency, the Naira, is expected to fall to N520 to the dollar in 2023.

This is according to Tatonga Rusike, an economist at the Bank of America(BOE) in a note to investors.

Bloomberg reports that the Bank of America told investors that the present Naira exchange rate is overvalued at 20 per cent.

BOA argued that the widely used black-market rate, the central bank's real effective exchange rate, and "our own currency fair value analysis" will all come into play.

Part of the note reads:

"The official rate has depreciated by less than 10% since December 2021 even as the parallel rate is down by nearly a third within the same period, widening the gap to almost 70%.

“We see the trend continue and scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.

"We also expect the Naira to face increasing pressure, but given the government's limited external borrowing, devaluation is unlikely to occur until after the February 2023 presidential elections."

Naira present exchange rate

The naira exchanged at 440.95 to the dollar in the official spot market as of 12.15 pm and about 731.46 in the parallel market, according to @naira_rates, a Twitter account that tracks the black market.

Bank America further noted that:

“The greater the disparity with the official market, the higher the likelihood of increasing excess demand for foreign currency on the parallel market."