JP Morgan Predicts Naira to Dollar Exchange Rate by December As FG Targets N650 a Dollar
- JPMorgan, an American multinational financial services firm, has predicted the naira to dollar exchange rate by year-end
- This comes just days after the federal government announced there is expectation of N650 to N750 to a dollar exchange rate by December
- Several new policies are set to be implemented in the coming days as the CBN awaits the inflow of $10 billion.
Dave Ibemere has over a decade of experience covering business and the economy.
JPMorgan Chase & Co has predicted that the naira to US dollar will close the year at N850 in the foreign exchange market.
The financial company stated this in a November 1 note titled "Nigeria local markets strategy: Getting set for re-opening".
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JPMorgan also expects the Nigerian government to be willing for greater exchange rate flexibility, BusinessDay reports.
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Part of the note reads:
“The Central Bank of Nigeria (CBN) appears willing to once again allow a flexible exchange rate without the use of moral suasion to limit the upside. This was initially the case during the first attempt at re-caliberating the FX market, however those efforts lost steam due to inflation concerns.
“There is hope the recent efforts to restore a flexible FX regime may be sustained given the willingness to accompany it with tighter monetary conditions.
"The interbank FX rate has risen in recent days to over N900, from N750, thereby significantly closing the gap to the parallel rate which is now just above N1,000."
Naira problems
JP Morgan also said that the major challenge in CBN's plan to unify the exchange rate is limited FX liquidity in the official market and that the naira isn't a fully convertible currency.
The financial institution also noted that the backlog of forex is a major challenge.
JPMorgan noted further:
"More Nigerians will patronise the parallel market due to lack of liquidity. In our opinion, when authorities refer to the FX backlog, they are referring to US $6.8 billion in FX forward commitments that the central bank has not honoured – the majority of which has been covered by commercial banks.
“However, we estimate up to a further $$3-4billion (probably less given the FX adjustment) in unmet FX demand needed for goods and services imports. CBN will need to clear both backlogs, a difficult task given the low levels of net FX reserves.
“We previously estimated that Nigeria’s net FX reserves could be as low as $3.7billion at the end of 2022. We do not have new information about the central banks short-term contingent liabilities, however gross FX reserves have further declined by $4.1billion through this year and now amount to around $33.3billion, suggesting the net position could be lower."
Tinubu's govt sets 'fair' naira to dollar exchange rate target by December 2023
In a previous report by Legit.ng, Tinubu set an exchange rate target for naira before the end of 2023.
Several reforms have been introduced, and it is expected that the dollar supply will ease the pressure.
Naira continues to exchange at the lowest level in history at both the official and unofficial markets.
Source: Legit.ng
