Parallel market rate and exchange window converge to official rate in 2021 – United Capital report

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United Capital Plc has stated that it expects a convergence between the parallel market rate and the I&E exchange window in 2021, which depends on repeating history as well as CBN intervention in the activities. of the parallel market.

This is contained in a recent report from the company: Nigeria Outlook 2021 – A shot at recovery.

READ: CBN to ‘introduce’ uniform exchange rate for naira

According to the company,

  • The point is, the Nigerian economy already existed here, in 2016, when the parallel market rate soared to N500 / $ 1 but converged to N / $ 360 after the introduction of the I&E window. . “

Informed of this, the company believes history and regulation will lead to a possible appreciation of parallel market rates from N 470 / $ 1 to N 500 / $ 1 against the official rate.

READ: United Capital Plc lists N10 billion in fixed rate bonds

Regarding the official rate, the company submits that its projection is that the official rate should find its level around N400 / 1 $ -N415 / $ 1 in 2021 – thus expecting the parallel market rate and the I&E window will also be around N400 / $ 1 -N415 / $ 1 this year.

What they say

According to the report,

  • “If the past is any indication of the future, we believe that an additional 6% to 10% exchange rate adjustment (to bring the official rate to around N400-N415 / $ 1) will be needed to structurally rebalance the current account. ‘by the end of the year or Q1-2021. Other upward factors that may be supporting the market include recent World Bank inflows of $ 1.5 billion, the offered bilateral facilities expected from Brazil and a possible Eurobond issue in 2021.
  • “Despite the expected decline in diaspora remittances, we believe that the decision to allow recipients of diaspora remittances through international money transfer operators (IMTOs) to have inflows in foreign currency via the designated bank of their choice, will help improve liquidity in the system and help reduce the pressure on parallel market rates in the future. “

United Capital Plc expects these to dramatically improve the ability of the CBN to defend the currency at N400 / $ 1 -N415 / $ 1.

What you should know

Since yesterday:

  • The official CBN rate was N380 / $ 1.
  • The parallel market rate closed at 470 N / $ 1.
  • The I&E FX window opened at N392.69 / $ 1 and closed at N394.67 / $ 1.


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