Analysts Predict New Naira Rate Against Dollar in H2 2024, Speak on Growth Projection

• In the second part of the year, analysts predict that the value of the naira would settle at around N1,500
• For the rest of the year, the naira will depreciate due to speculation, hoarding, and a lack of confidence
• United Capital noted that the foreign reserves may still be in the neighbourhood of $34 billion due to continuous foreign exchange infusions

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Analysts believe that the naira will stabilise around N1,500 in the second half of the year, after the Central Bank of Nigeria's (CBN) recent injection of foreign exchange sales to Bureaux De Change (BDCs).

ThisDay reported that this forecast can be found in the United Capital Half-Year Economic Outlook, which is headlined "Balancing Act: Nigeria's Path to Economic Stability."

Read also

No more N2,050/£: Naira weakens, British Pound strengthens as local currency struggles amid pressure

According to the report, even if the CBN keeps interfering in the foreign exchange market, the naira will weaken for the remainder of the year as a result of speculation, stockpiling, and a lack of confidence.

It stated,

“Notably, due to CBN’s efforts at increasing FX inflows into the economy, curbing speculation and hoarding activities, we expect the naira to moderate at N1,500/$ in H2-2024.”

Nigeria's reserve to remain ta current level

Additionally, United Capital pointed out that because of ongoing FX injections, external reserves might remain around $34 billion.

The report added.

“Foreign reserves will hover around $34bn+ for the remaining months of the year. However, due to the continuous defence of the naira by the CBN, foreign reserves may remain at current levels with the possibility of improving slightly as the government’s efforts to attract foreign inflows materialise.”

Read also

Naira crashes at black market, traders sell dollar, euro, pound at new exchange rates

Despite the 2.98 percent rise in Q12024, United Capital said in its prediction that the economy is only anticipated to grow marginally in the upcoming quarters.

“We expect government initiatives to positively bolster productivity in the economy. Consequently, we align with IMF’s 2024 full-year growth projection of 3.3 per cent.”

FG to keep borrowing

The study also made clear that because of poor revenue, the government would keep borrowing money to fund its 2024 budget.

“Government will continue to borrow to finance its 2024 budget. This is because government’s revenues are low, and the 2024 budget can only be financed through borrowings. Meanwhile, the government plans a supplementary budget of N7.24 trillion to finance the budget. Local borrowings will constitute a major portion of government’s debts.”

According to the research, headline inflation is expected to reach 27.5% by December 2024, assuming no notable fluctuations in domestic prices.

Read also

Calm at ports as customs exchange rate to clear goods remains unchanged for 5 days

Additionally, it predicts that the primary harvest season in late Q3–24 and early Q4–24, as well as the unwinding of statistical base effects, may cause prices to moderate in Q3 2024.

It did note that there are still upside risks to consumer prices, such as the possibility of harvests that are below average, hikes in the minimum wage, and volatility in foreign exchange.

According to the research, the interest rate may be kept at present levels by the Monetary Policy Committee (MPC) for the duration of H2 2024.

However, when the cost of goods and services gradually declines, the first interest rate cut may occur in March 2025. By December 2024, headline inflation is not anticipated to reach the CBN's objective of 21.4%.

CBN predicts new exchange rate

Legit.ng reported that in order to halt the naira's ongoing decline in value relative to the dollar and other foreign currencies, the Central Bank of Nigeria (CBN) has intervened.

Read also

Naira opens new week strongly as CBN updates dollar, pound, euro exchange rates

In an effort to improve liquidity and lessen the strain on FX demand, the CBN announced that it had invested $106.5 million in the foreign exchange market in the last two days.

This was revealed by the top bank in a circular that was signed by Omototla Duke, the CBN's director of financial markets sections.

Source: Legit.ng