Comercio Partners sees naira stabilising around N1,500/$

Comercio Partners Limited, an investment banking firm, has said that it expects the naira to stabilise around N1,500/$.

The investment banking firm noted this while presenting the Comercio Partners Macroeconomic Outlook 2024 with the theme “Finding Rain in Drought.”

“From what we see from the Central Bank of Nigeria (CBN) and the parallel market, we feel that the Naira might consolidate around the N1,500/$ region for the next couple of months.

“This is because we have noticed increased participation in the NAFEM window. And the NAFEM window is now showing a true reflection of how market participants feel,” said Ifeanyi Ubah, investment research associate at Comercio Partners, during the media presentation of the report.

He said: “After monitoring the NAFEM window carefully, the lowest and higher bid rates and how the market closed; the NAFEM window is now showing that it is not far from market anticipation in terms of the black-market rate.

“So, these liberalisation policies will make the naira hover around N1,500/$ to N1,600/$ for the next six months, barring any other circumstances.”

The Nigerian naira depreciated by 0.29 percent. Data from the FMDQ Exchange revealed that the dollar was quoted at N1,503.38 on Wednesday, compared to N1,499.07 on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

The market dynamics further showed that the intraday high closed at N1,582 per dollar on Wednesday, reflecting a weakening compared to the N1,550/$1 closure seen on Tuesday. Conversely, the intraday low appreciated to N922.38 on Wednesday, indicating strength compared to the N1,000 quoted in spot trading the previous day.

On Wednesday, at the parallel market, commonly referred to as the black market, the naira exchanged with the dollar at rates ranging between N1,533/$1 and N1,590/$1, further underscoring the pressure on the Nigerian currency.

The report’s macro analysis offers a snapshot of Comercio Partners’ journey, covering critical areas such as the global outlook, inflationary quagmires, long-term interest rates, global equities, and commodities.

Ubah, a doctor, also cautioned the Central Bank of Nigeria (CBN) against further interest rate hikes, noting that such a move is not good for the economy.

“I think the interest rate – Monetary Policy Rate (MPR) at 18.75 percent is already high and we need to emphasise that the transition mechanisms are right so that we can feel the impact of the high-interest rate we already have.

“If you do a correlation analysis between interest rate and inflation for Nigeria, we don’t see a relationship such that as you increase interest rates, there will be reduced inflation. Rather, we see a positive correlation,” Uba noted.

“This is unlike what is obtained in other countries. If you look at the data on interest rates and inflation for Nigeria from 1960 to date and run a regression analysis, you will see that they are positively correlated.

“So, if we are going by the data, increasing the interest rate will negatively affect the economy because you are going to increase misery and hardship because our inflation is not credit-driven. If it was credit-driven, we would say it has a direct impact. But we have more supply shocks and imported inflation,” he said.