The persistent currency risks and economic uncertainties in Nigeria may lead to caution by long-term investors, resulting in a pessimistic outlook on the Naira, a recent report by Afreximbank stated.
The Naira recorded a six-month low of N1,656.49 per dollar in the official foreign exchange (FX) market on September 17, following a strong demand for the greenback by the end users.
Several efforts being made by the Central Bank of Nigeria (CBN) to strengthen the local currency have not yielded long-term results as the economy continues to show signs of weakness due to foreign exchange crunch and lack of export diversification.
“Ongoing currency risks and uncertainties around Nigeria’s economic recovery could keep long-term investors cautious, reflecting bearish sentiment towards the naira,” Afreximbank report said.
It stated that Nigeria’s Naira slipped to a fresh low against the dollar with analysts blaming thin liquidity, as the CBN scaled back intervention and foreign investors took profits on domestic bonds.
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Afreximbank said Africa’s economy remains resilient with a growth forecast of 3.5 percent in 2024 (vs. 3.2 percent in 2023) and 4.0 percent in 2025.
It said this is despite numerous headwinds arising from soaring food and energy prices, weak global demand weighed down export performance, declining agricultural productivity arising from climate change and extreme weather events, power generation challenges, and conflict in some African countries.
“Recent heavy rainfall has led to widespread flooding across West Africa, East Africa, and the Sudd wetlands of South Sudan.
“Sudan, Ethiopia, Uganda, northern Angola, and the Cape Town area of South Africa have also been affected,” it said. “Meanwhile, dry conditions persist in eastern Liberia, Côte d’Ivoire, Ghana, Eastern Nigeria, and central and eastern Cameroon, with emerging droughts in parts of Nigeria and Cameroon.”
The report said severe winds have caused flooding and damage in Liberia, Mali, Niger, Chad, and Nigeria, noting that hot conditions will continue in Morocco, northern Algeria, and eastern Southern Africa.
“Nigeria and Niger signed a deal to boost their security cooperation. Relations between the two countries deteriorated after Niger’s junta ousted Mohamed Bazoum. This deal reaffirms their commitment,” the report said.
It stated that Nigeria and Equatorial Guinea signed an agreement to establish and operate a gas pipeline.
Afreximbank said the project is expected to cost $25 billion and with a capacity of 30 billion cubic meters per year.
