Experts Forecast Further Depreciation For Naira In FX Markets
The dwindling foreign exchange (FX) accruals into the nation’s foreign reserves and inability of the Central Bank of Nigeria (CBN) to moderate the current depreciation of the Naira in the FX markets, financial analysts at Bancorp Securities Limited on Monday predicted bearish outlook on the value of the Naira in the FX markets this week.
The analysts, in the firm’s ‘Weekly Stock Recommendations: August 14- August 18 2023’ report noted that the Nigerian economy currently remained in insidious terrains as the recently released audited financial statements of the Central Bank of Nigeria (CBN), showed an exposure in foreign exchange to about $14.56 billion.
They listed some of the downside risks associated with the exposure as including but not limited to the risk of default, which could be precipitated by the debtors dwindling revenue generation and multidimensional debt obligations; and further devaluation of the Naira, which could be a short-term alternative to placate creditors concerns.
In addition, the investment experts also identified the trickle down negative impact of the exposure on the real sector, in terms of higher cost of living and lower output from pivotal sectors.
In view of the worrisome scenario, they projected that “trading activities in the current week is expected to be characterized by flattish sentiments, with increasing uncertainty as to the resolution of the nation’s multifaceted downsides.
“With inflation report expected on Tuesday, August 15, 2023 the Nigerian bourse may sustain its 2-week long range trading save for a directional fundamental news. Profit taking activities intertwined with portfolio rebalancing is expected to continue in the financial services sector stocks, especially amongst the high capitalized stocks.
“The outlook on the value of the Naira in the foreign exchange markets is likely to hit negatively, the books of major players in the Consumer goods sector. Inflation is expected to rise, as the direct impact of the fuel subsidy removal amongst other austerity measures continue to deteriorate the disposable income of the populace”, the analysts added.
On the stocks’ investment prospects, the Bancorp Securities’ researchers recommended only two, namely WAPCO and NESTLE for buy and advised investors to hold investment decisions on FLOURMILLS, NIGERIAN BREWERIES, FCMB, BUACEMENT, MTNN, UCAP and sell scores of other stocks.