Weaker Naira Is Good For Business — FCMB

Nigerian lender FCMB Plc seems to be rooting for the devaluation of the Naira, as it sees potential for huge profit-taking.

Acting Managing Director Yemisi Edun said that the bank is projecting a boost in profits due to a weaker naira in 2021 as it did in the previous year when foreign currency earnings rose more than two-fold to 10 billion naira ($24.5 million) from 3.5 billion naira.

“The gap between the spot and the forward rate in the market also supports this foreign-exchange gain,” Edun said.

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Last year, the naira was devalued twice by the Central Bank of Nigeria after the price of crude oil plummeted due to the coronavirus. Oil accounts for about 90 percent of the country's foreign revenue earnings.

The devaluations contributed to FCMB's 9.9 percent boost in interest income which made it soar to N151 billion. 

On Wednesday, Goldman Sachs gave a report that suggested that Nigeria's central bank may be further diluting the naira in a bid to meet up with international financing conditions.

Investors are now expecting the naira to trade at N425.69 per dollar in three months and N440.50 per dollar in six months based on non-deliverable forward contracts quoted in Lagos on Thursday. That compares to a spot rate of N407.38 as of 8.21 a.m today.

Africa’s largest economy operates a multiple exchange rate regime with a pegged official rate of N379 to the dollar and a controlled but more flexible rate for investors, exporters, and some government transactions. There are also rates for small businesses and a parallel market rate that the central bank considers illegal. Nigeria has also resisted calls by the International Monetary Fund to merge the rates.