The naira is anticipated to stabilize against the US dollar by the end of the fourth quarter of 2024, closing the year on a positive note, according to a recent macroeconomic report from First Securities Discount House (FSDH) Merchant Bank Ltd. The report, titled “Priorities for Economic Stability in the Short-Term,” outlines several factors contributing to this optimistic outlook.
Key drivers for the expected stabilization include a projected increase in foreign exchange (forex) inflows, which will be supported by rising policy rates and intensified forex interventions from the Central Bank of Nigeria (CBN).
The report also highlights the potential positive impact of the Dangote Refinery’s operations, which are expected to significantly ease pressures on the forex market.
Throughout 2024, the naira has faced challenges in stabilizing against the dollar amid ongoing market volatility. The currency has depreciated by 69.9% year-to-date, starting at N907.11 per US dollar in January and sliding to N1,541.52 per dollar.
After experiencing a notable appreciation in March, when it neared the N1,300 range, the naira has struggled, reaching N1,668.97 by the end of September. The report indicates that while recent improvements in forex inflows have been observed, they have had a limited impact on the naira’s ability to appreciate against the dollar.
Looking ahead, the commencement of operations at the Dangote Refinery is expected to play a crucial role in alleviating forex pressures, as petroleum products account for 30-40% of Nigeria’s import bills. Additionally, the Naira for Crude Initiative, launched on October 1, 2024, is anticipated to provide further relief to the country’s forex challenges.
The report maintains an optimistic outlook for the naira in the fourth quarter of 2024, suggesting a more stable exchange rate as these economic interventions take effect.
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