Stability Of The Naira, More Of An Issue Than Elections – FBN Capital

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FBN Capital forecasts that the current drop in oil prices and the subsequent fears that the CBN will be unable to maintain exchange rate stability could pose more of a problem than the predicted macroeconomic damage from the elections.

FBN Capital

Reserves are still close to US$40bn and devaluation would be very much a last resort.

FBN Capital forecasts that the current drop in oil prices and the subsequent fears that the CBN will be unable to maintain exchange rate stability could pose more of a problem than the predicted macroeconomic damage from the elections.

However, according to the analysts at FBN Capital, “The CBN is far from exhausting its arsenal for its defense of the line. Monetary tightening (via the CRR) is a strong possibility, not to mention further administrative measures. Reserves are still close to US$40bn and devaluation would be very much a last resort”.

FBN Capital also explained that limited macroeconomic damage from the elections is expected, but notably a small increase in the fiscal deficit. While not insulated from the global village, Nigeria’s growth momentum is driven by providing for its large and undersupplied domestic market.

Consumption demand is robust, and we see GDP growth back above 7% in 2015.

The analysts also noted, according to the report, that GDP growth has exceeded 4% each year since 2000. Population growth slowed to 2.3% in 2012 according to CBN data.

This strong GDP growth has been driven by the non-oil sector, which can be traced to the reforms of the second Obasanjo administration (2003-07), favourable weather conditions and low interest rates in developed economies. This has pushed growth in Nigeria ahead of the BRICS excluding China.

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About FBN Capital: FBN Capital Limited is a subsidiary of FBN Holdings Plc, and is a full service Investment Bank and Asset Management Company with a reputation as a trusted and respected financial institution.
Backed by significant financial capacity and a strong tradition of governance, the business is built on the core principle of creating value and wealth for all stakeholders.
At FBN Capital we provide strategic advice, arrange finance, administer assets, manage funds, sell investment products and invest alongside clients.
FBN Capital offers financial solutions to individuals, institutions and sub-nationals through five key divisions: Investment Banking; Markets; Trust and Agency Services; Asset Management; and Alternative Investments.

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The FBN Capital Research Team
FBN Capital
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