Market News

Nigerian firms expect a rise in the value of the naira and an increase in interest rates over the next six months, according to the Central Bank of Nigeria’s (CBN) latest Business Expectations Survey.

The report reveals that 26.3 percent of respondents expect the naira to appreciate against the US dollar within the next six months, giving relief to businesses that have endured the steep devaluation of the currency after the unification of the exchange rate in 2023.

“Only 26.3 percent of respondents expect the Naira to US Dollar exchange rate to appreciate in the next six months. Conversely, 19.3 percent expect the rise in three months, with 8 percent expecting the rise over the next month,” the survey showed.

The naira slipped to its lowest levels in almost a month last week but appreciated by N5.72 as the dollar was quoted at N1,600.43, marking a gain of 0.4 percent compared to N1,606.15 seen on Friday at the Nigerian Foreign Exchange Market (NFEM), data from the CBN indicated.

The report shows that the firms expect borrowing costs to rise despite naira rise optimism, highlighting businesses’ fears of inflationary pressures that might make the authorities hold rates for longer, squeezing expansion plans.

Despite this cautious optimism, firms identified key challenges that could moderate future growth, including high interest rates, insecurity, and heavy taxation.

The survey, conducted across 1,900 business enterprises nationwide, also revealed growing expectations of higher borrowing costs.

The report stated that 16.3 percent of respondents expect interest rates to increase in the next three months. “15.4 percent see borrowing rate increasing in the next 6 months, with 13.3 percent of businesses seeing the increase over the next month.”

The monetary policy committee (MPC) raised benchmark interest rates throughout its meetings last year, hiking borrowing costs by a combined 875 basis points t0 27.5 percent in a push to anchor stubbornly high inflation.

Though consumer prices are slowing compared to the same period last year, it still remains sticky as the inflation rate climbed to 24.23 percent in March, according to the National Bureau of Statistics (NBS), marking the first uptick since the recent rebasing and defying analysts’ expectations of a slowdown.

The inflation data scheduled to be released on the 15th of this month will play a crucial role in the decision of the policymakers whether to hold, cut or raise rates further at the MPC’s 300th meeting slated for the end of May.