Naira Expected to Strengthen to N850 by Year’s End, Says JPMorgan
The outlook for the Nigerian naira has improved due to reports that the Central Bank of Nigeria (CBN) is planning to fulfil its forward FX obligations, along with a recent dovish statement from the U.S. Federal Reserve (Fed).
Unverified reports suggest that the CBN will fulfil 75–80% of the outstanding matured foreign exchange forwards through Nigerian banks.
Federal Reserve Chairman Jerome Powell’s comments following the recent policy meeting led to a weakening of the U.S. dollar against other currencies.
While the Fed acknowledged the resilience of the U.S. economy, it did not rule out future interest rate hikes.
JPMorgan Chase and Co. predicts that by the end of the year, the naira may strengthen towards the N850 against the U.S. dollar due to tighter regulations, attractive rates, and favourable FX levels.
This is expected to discourage further dollarization and attract foreign capital to Nigeria.
The bank anticipates that the Nigerian government will continue to pursue greater exchange rate flexibility.
However, challenges remain, such as significant delays in meeting foreign exchange demand and low net foreign exchange reserves.
The Nigerian government plans to implement new regulations in the forex market to strengthen the naira’s value and curb illicit currency trading.
These regulations aim to deny illicit black market supplies and expand the official market to include all lawful transactions.
Nigeria’s Finance Minister, Wale Edun, has stated that the country expects to receive $10 billion in inflows in the coming weeks, which will help ease liquidity and clear the backlog of overdue forward contracts affecting the Naira.
President Bola Tinubu also signed two executive orders to prevent the flow of dollars into the parallel market from the official FX window.
Overall, these developments indicate positive changes in Nigeria’s foreign exchange market and its efforts to stabilise and strengthen the naira.
Source: Nairametrics
