Naira to sustain rally after 46% gain against dollar, says Rewane
- Rides on $7b FX backlog clearance, foreign investments surge
The naira will sustain ongoing rally at both official and parallel markets as dollar liquidity rises, Managing Director/CEO, Financial Derivatives Company Limited, Bismarck Rewane, has predicted.
In an emailed note to domestic and foreign investors, he disclosed that cost pressures are likely to ease due to the naira’s rebound by 46.18 per cent to yesterday’s close N1,310/$ from an all-time low of N1,915/$ in February at the parallel market.
Rewane, also an economist, said the naira had since February, appreciated significantly across the markets, fueled by sanitisation of the forex market, an increase in forex supply and a fall in the demand for dollars.
The settlement of the $7 billion verified forex backlog of forward commitments have boosted confidence and improved the credibility of the Central Bank of Nigeria (CBN).
Goldman Sachs is forecasting that the naira will appreciate further to N1,200/$ by the end of 2024.
“However, the pressing question remains, will the naira tumble again? The answer is No, if Nigeria continues to do the right things. Prospects for forex earnings are promising, with foreign portfolio investments on the rise. Nigeria’s key export commodities have also seen significant price surges, with cocoa trading at a record high of over $10,000 per tonne in the global market and oil prices exceeding $85pb as oil production reached an impressive 1.48mbpd in February 2024,” Rewane stated.
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The naira’s appreciation, he further stated, followed the Monetary Policy Committee (MPC) meeting on February 26 and 27, during which interest rates was increased sharply by 400 basis points (bps) to 22.75 per cent per annum.
The MPC also met on March 24/25, agreeing to hike interest rates by 200bps to 24.75 per cent per annum to keep prices in check.
“These moves, combined with the CBN house-cleaning exercise to mop up excess demand for dollars, signal that the apex bank intends to stay on the path of orthodoxy to positively anchor inflation and stabilize exchange rates. Consequently, though slowly, the naira is expected to sustain appreciation,” Rewane said.
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