Fitch forecasts Nigerian naira to fall to record low in four years

• Fitch forecasts a negative outcome for the naira by 2028, according to a report by BMI Research.
• It said the continued depreciation of the naira would increase the cost of importing medical devices and reduce the purchasing power of consumers.
• Despite government incentives, local manufacturing of medical devices in Nigeria still faces significant obstacles.

Legit.ng journalist Victor Enengedi has over a decade of experience in the energy, MSME, technology and stock market sectors.

Fitch Solutions, a financial intelligence provider, predicts that the naira could fall to around 1,993 naira to the dollar by 2028, posing significant challenges for the Nigerian pharmaceutical industry in importing medical equipment.

A recent report by BMI Research, a subsidiary of Fitch Solutions, noted that despite the expected economic recovery, the Nigerian medical device market is likely to continue to face operational and demand-related challenges in the near term.

Fitch forecasts the Nigerian medical device market to expand at a compound annual growth rate (CAGR) of 10.8% from 2023 to 2028 in local currency terms and 9.6% in dollar terms, reaching an estimated market value of 171.1 billion NGN (344 US dollars). 7 million) by 2028.

report highlights that increased health spending focused on universal health coverage, coupled with Nigeria’s large population and the double burden of chronic and infectious diseases, will keep demand for medical equipment, especially diagnostics, consumables and hospital equipment, high in the short to medium term perspective.

Citation Sanofi and GlaxoSmithKline as examples of companies that have left Nigeria The report noted that due to the devaluation of the naira, the continued depreciation of the currency will increase the cost of importing medical devices and reduce the purchasing power of consumers.

The Fitch subsidiary also indicated that despite government incentives, significant obstacles continue to prevent local medical device manufacturing from gaining traction in Nigeria.

The report stated:

“The continued weakness of the naira will increase the cost of importing medical equipment and reduce the purchasing power of consumers. Like other sub-Saharan African markets, Nigeria is heavily dependent on medical equipment imports, with a share of over 95%. We expect the naira to end at NGN/USD 1,993 at the end of 2028 from NGN/USD 306 in 2018.”

The report emphasized that, since naira depreciates, the cost of importing medical devices will continue to rise, weakening both the health care system and the ability of patients to afford essential medical technologies, especially given the underfunding of the public health sector.

However, on the export side, a weaker naira could improve the competitiveness of locally produced medical products, supporting growth in the sector.

Tinubu’s attempt to control the naira

Years of economic mismanagement have left Nigeria facing a severe dollar shortage. countries economy has long relied on oil exports while maintaining high demand for imported goods, creating an unstable basis.

In an effort to address the problem, President Bola Tinubu eased long-standing foreign exchange controls shortly after taking office in May 2023.

As a result, the naira, previously maintained at an artificially high rate against the dollar, depreciated by about 70%. Tinubu sought to attract foreign investment and increase Nigeria’s attractiveness as an investment hub.

However, in the short term this shift has led to inflation surgehitting a 28-year high and fueling a cost-of-living crisis that has sparked deadly protests in Africa’s most populous country.

Revane advises CBN to stabilize naira

In related news legit.ng reported that Bismarck Revane proposed solutions to the current state of the Nigerian economy

A renowned economist has called on the Central Bank of Nigeria (CBN) to focus on stabilizing the naira and controlling money supply growth to mitigate inflationary pressures.

He also noted the shortage of currency supply, the high level energy costs and poor policy coordination as key drivers of economic instability.

Source: Legit.ng