Analysts Predict Good Rate for Naira as Banks, Others Resume Operations 48 Hours After Shutting Down

• Analysts have said there is hope that the Nigerian currency, naira, will appreciate soon against the dollar this week
• According to them, this will occur as soon as the federal government begins to utilise the $2.25 billion World Bank loan
• The fund is made up of a $1.5 billion loan to revive the economy, and $750 million will be utilised to protect oil revenues

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

Financial analysts said the naira could see a boost beginning this week, given the federal government's plan to utilise the $2.25 billion World Bank loan granted to Nigeria.

The $2.25 billion loan is primarily intended to help Nigeria implement economic reforms that have led to the biggest cost-of-living crisis in a long time by bolstering revenue.

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The first project, expected to receive $1.5 billion, is the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing.

A $750 milerating resource mobilisation lion funding proposal has been made for the second project, NG Accel Reforms Programme-for-Results.

How the loan will be used

According to a statement from the bank, the majority of the $1.5 billion loan will shield millions of people from increasing poverty since President Bola Tinubu took decisive action to revive the nation's faltering economy a year ago.

The bank stated that the remaining $750 million will be used to protect oil revenues from being jeopardised by recurrent theft-related output limitations. It will also assist tax reforms and revenue.

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Finance experts predict this will increase the supply of dollars and support the weak naira.

Nigeria's naira, which has lost about 70% of its value since the beginning of the year, weakened against the US dollar on Friday despite the nation's announcement that the loan had been approved.

As bankers and other traders from different walks of life resumed activities following the Eid break, which saw a pause in business activities, analysts who spoke to Daily Independent predicted a resurgence this week.

They opined that the World Bank's infusion gives the CBN the strength to support the currency, which has been weakening lately.

How analysts are reacting

Economist Cyril Ampka stated that the $2.25 billion loan, which has an interest rate of 1%, is a short-term move to strengthen the liquidity situation.

He said:

“If all things are equal we expect the appreciation of the naira but there are other factors that are at play in the market.

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“Currently, the economy is facing a supply deficit of FX which is piling pressure on the naira.

“To address naira volatility long-term, there’s a need to look at more structural kinds of strategies, like enhancing competitiveness to boost non-oil exports and also developing local capacity such that we are sufficient in producing key products and won’t need to import critical inputs which drain FX.”

Stephen Iloba, an Abuja-based financial analyst, also said the loan will boost the economy if it is rightly channelled.

He said:

“The Federal Government and the CBN are being presented with another lifeline with this loan and I am hopeful it will impact the foreign exchange market positively.

“Though we may not see the kind of accretion we saw early this year in the foreign exchange market, we are likely going to see a good improvement.

FG settles important debt

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Legit.ng earlier reported that to settle the Ways and Means advances from the Central Bank of Nigeria (CBN), the Nigerian government set aside approximately N4.83 trillion from the profits of Nigerian Treasury Bills (NTBs) and Bonds issued in 2024.

Wale Edun, the coordinating minister of the economy and minister of finance, stated this during the Lagos Business School Breakfast Club.

Through the Ways and Means advances, the Nigerian government received approximately N2.94 trillion from the top bank in 2023 to pay down domestic debt.

Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.

Source: Legit.ng