Naira Exchange Rate to Close Around N1,560/$ in 2024 -Firm

Amidst sustained FX volatility, FSDH analysts have projected that the exchange rate would settle at N1,560 per US dollar in 2024, according to the group’s macroeconomic update. The naira has remained under intense pressure, and like FSDH Group, exchange rate projections reveal the bullish perspective of top investment firms.

Recall that Fitch Ratings set N1,450 per US dollar exchange rate for 2024, while a rather bullish projection of N1,200 was set by Goldman Sachs for the year. In an interview with Bloomberg, Andrew Matheny, an economist at Goldman Sachs, said the greenback could further trade below the projected N1,200.

Despite naira bulls predictions, exchange rate has been falling up to N1660 until the Central Bank FX intervention at each points when exchange rate has crossed the red line.

In its macro update, FSDH noted that forex inflows improved, but analyst consensus remained that US dollar demand pressures persist. “There has been an observable improvement in the sources of Forex inflows over the past quarters, yet FX pressures remain,” FSDH said in the update.

Analysts also noted that the economy recorded a trade surplus of US$8.9 billion in H1 2024, which was a 45.2% increase compared to US$6.1 billion in H2 2023. The report noted that the high interest rate environment has boosted portfolio investment inflows into Nigeria. 

As a result, Nigeria’s external reserves have been rising, although this has come at the expense of a depreciating naira. “The CBN’s current focus on reserve accretion is aimed at boosting confidence in the FX market, but this posture is likely to shift in Q4 2024”, FSDH said.

In Oct, the market has seen low FX intervention so far. The maximum FX auction sales was $60 million even with surging balance in the external reserves, signaling that the CBN is comfortable at the exchange rate level around N1600.

“We expect the exchange rate to close the year around N1,560/US$. With the festive season approaching and added pressure in the FX market, we anticipate an increase in Forex inflows, driven by hikes in policy rates and increased FX interventions by the CBN, aimed at maintaining a stable exchange rate”, FSDH said in its update.

Analysts are of the view that the commencement of operations at the Dangote Refinery will significantly reduce pressure on the Forex market. “Petroleum products account for 30-40% of Nigeria’s import bills, and at full capacity, the Dangote Refinery will substantially lower these bills, thereby easing pressure on the Naira and stabilising the exchange rate in the near term.

“Additionally, the Naira for Crude Initiative, which kicks off on October 1st, 2024, is expected to further mitigate Forex risks. Thus, we maintain a positive outlook for the naira in Q4 2024,” FSDH stated. #Naira Exchange Rate to Close Around N1,560/$ in 2024 -Firm FX Stability: CBN Sells 122.671m Dollars to 46 Authorised Dealers