The Nigerian naira is predicted to end the year falling to N1,621.7 to a U.S. dollar, continuing its volatility despite interventions by the Central Bank of Nigeria (CBN) to shore up the currency.
This new outlook is however a downgrade from the previous forecast of N1,571.7 against the greenback in the last three months through December, according to Stears macroeconomic outlook for Nigeria.
“As we approach year-end, we foresee currency pressures lingering, barring any substantial interventions from the CBN. In Q4 2024, we forecast the naira to trade at N1,621.7/$ in the official market, above our previous forecast of N1,571.7/$,” the report stated.
The naira depreciated sharply by 8 percent in October, eroding its September’s 3.7 percent gains, displacing the local unit from the best-performing currency to worst month-on-month, the Africa-focused financial data gathering firm said.
It added that the naira depreciated 2.5 percent in the parallel market, hitting a record low of N1,750/$ and keeping the market premium high at 7 percent in October.
Read also: Weaker naira drags budget to six-year low
Pressures on the naira are primarily driven by lower forex supply, evidenced by the fourfold dip in the average daily turnover at the NAFEM window to $81 million on October 29 from $359 million on October 21.
This is despite Nigeria’s foreign reserves continued uptrend as the market anticipates a detailed plan of $2.2 billion in approved external borrowing. Details from the CBN showed that FX reserves maintained its growth trajectory, as the gross reserve level grew marginally by USD 2.24 million week on week to USD 40.28 billion.
Meanwhile, forex demand intensifies as we approach year-end due to various factors, including forex for travel and inventory stock-up for the festive season.
There was no substantial market intervention in October, compared to August and September, when the CBN conducted Retail Dutch Auctions, forex sales to authorised dealers and Bureau De Change (BDCs) to plug supply gaps.
Data from the FMDQ securities showed that the naira was quoted at N1,675.62 on Monday, higher than the forecast but with the monetary authorities hiking rates by a quarter percentage points, the battered currency is expected to budge.
At the end of the last monetary policy committee meeting this year, the CBN hiked key interest rates to 27.50 percent from 27.25 percent — marking the longest tightening cycle since the reenactment of the CBN Act in 2007, reflecting the pressing need to stabilise prices and support the currency.
Analysts are expecting the apex bank to intervene in the market in its usual trend to control the currency risk, especially as we head towards yuletide.
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