Naira: Official Rate to Cross N1000 in 2024 –Investment Firm
The outlook for Nigerian naira remains bleak and analysts are expecting the exchange rate at the official market to cross the red line in 2024.
The naira has seen a record loss despite a large devaluation in June 2023. The local currency suffered from rising import appetite despite low foreign currency receipts that can meet the level of demand logged daily by manufacturers and other invisible users.
FX challenge will persist in 2024, research analysts at LSintelligence Associates said, adding the federal government revenue could be hit as the price of crude oil has come under pressure due to global uncertainties.
In its outlook for 2024, multi-asset investment banking firm, CardinalStone Partner Limited, said unequivocally that the official FX rate could cross N1000 per US dollar.
Naira touched new lows in 2023, reflecting the over 40.0% currency devaluation by the CBN and weak FX inflows, analysts said while explaining their projection for the year.
“Adopting a blend of uncovered interest rate parity and purchasing power parity, we expect the naira at the official window to cross N1000.0/$ in 2024”, CardinalStone stated.
MarketForces Africa reported that the Central Bank of Nigeria (CBN) has halted forex market intervention for about three months, allowing forces of demand and supply to determine the exchange rate.
Due to the decision to halt its weekly FX market intervention, the naira has seen large downward swings, crossing the N1000 mark at the Nigeria Autonomous Foreign Exchange Market.
Development in the forex market suggests that the supply side remains weak, though there is currently lower pressure on the exchange rate. Data from the FMDQ platform showed that FX rate closed at N869 per US dollar as of Friday.
On Friday, the Nigeria Autonomous Foreign Exchange Market (NAFEM) rate traded within the range of N700 – N1,268 per US dollar but closed at N869.39.
This points towards an appreciation of +4.2% or N37.7 week on week, Coronation Research said in an update reviewed by MarketForces Africa.
In the forwards market, FX was traded within the range of N885.0 – N914.2. In the 1-month contract, fx appreciated by +7.0% to close at N907.0/USD, and in the 3-month contract, fx appreciated by +6.5% w/w to close at N929.5/USD.
“Based on our channel checks, we note that in the parallel market, the Naira closed at an average of N1,230 on Friday. The current gap between the NAFEM and the parallel market rate is 41.5%”, said Coronation Research.
According to data from FMDQ, the volume of US dollars transacted at NAFEM space decreased by -26.0% or -USD107.1 million to USD305.1 million. Dangote Reacts to EFCC Visit to Headquarters
The NAFEM window recorded an inflow of US$15.3 million, according to a market report. There were no injections made by the CBN for the eleventh consecutive week. However, foreign portfolio investors (FPIs) accounted for 38.7% of injections followed by non-bank corporates.
