Bad Run For Nigeria as New Report, Expert Say Naira Will Continue to Fall Until 2025

Bad Run For Nigeria as New Report, Expert Say Naira Will Continue to Fall Until 2025

  • A new report by the Economist Intelligence Unit has said the naira will continue to fall until 2025
  • The report said the local currency will depreciate to as low as N1,068 per dollar in three years
  • The prediction comes amid the naira’s worst performance in the official market recently

Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.

There may not be a relief for the naira soon as the Economist Intelligence Unit (EIU) predicted doom for the Nigerian currency in the next three years.

The research firm said the official exchange rate will weaken to N1,068 to a dollar between 2023 and 2025.

Naira, EIU, CBN
A new EIU report says naira will not recover in three years Credit: Bloomberg/Contributor
Source: Getty Images

Nigeria to experience forex losses until 2025

The company stated in its report for Nigeria that the country will continue to experience currency losses due to the massive size of the black market and the country’s low reserves.

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The EIU revised its exchange rate forecast to a more considerable devaluation in 2025 to reflect the widening disparity between the official and parallel exchange rates.

The report predicted Nigeria will try to merge the exchange rate windows when this happens.

EIU said:

“We have adjusted our average exchange-rate forecast for that year to N1,068.3:US$1, from N914.4:US$1 previously. As our forecast for continued currency losses over time has not changed, the projected rate is also now weaker for later years.

A chartered banker, Uzochukwu Okewu, agreed with EIU. Okewu said the size of the country’s Forex reserves is hugely affecting the naira. He said investors, especially portfolio investors, consider the size of a country’s FX reserves before investing.

“When investors come, they first consider your reserve's size if they want to pull their resources. So, now Nigeria’s reserves are abysmal, hurting the naira significantly.

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“The EIU projection is on point because Nigeria is not earning enough Forex to be a buffer against depreciation. So, the naira is taking all the hit from a depleted reserve,” he said.

Foreign exchange scarcity affecting naira performance

Nigeria has been battling acute Forex scarcity, impacting the naira and living standards.

The Forex market received a respite a few weeks ago when the Nigerian government reportedly pumped $7 billion to offset Forex backlogs.

Okewu said the move boosted FX liquidity and relieved the embattled naira.

“We all saw what enough liquidity can do to a currency. When the country provided Forex for the banks to offset backlogs, the naira rebounded by as much as 20%, but as soon as that dried up, the naira began to tumble again,” he said.

The local currency plummeted to its lowest in the official market on Thursday, November 9, 2023, hitting nearly N1,000 per dollar, the weakest in naira’s history.

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Analysts believe the lack of Forex liquidity weakens investor confidence and drags the naira further down the hill.

EIU blames CBN's lack of firepower for the naira's crash

The EIU said in its report that the Central Bank of Nigeria (CBN) needs more experience and the firepower to address forex volatility.

The report said a 35% gap between the official and parallel markets emerged in June when Nigeria embarked on the forex reform, which has now crashed the naira.

But Okewu faulted the EIU and said what needs to be improved is the political will and expertise to handle the FX problem.

“I believe it is not the issue of competence but of political will to make the hard decision,” he said.

The report predicted a dry run for the naira until 2028 due to CBN’s reluctance to clear Forex backlogs valued at over $6 billion.

The EIU noted that about one-third of the official foreign reserves of about $33 billion are tied up in derivative contracts or loans.

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It noted that about one-third of the official foreign reserves of about $33 billion are tied up in derivative contracts or loans.

The EIU stated:

“Sizable devaluations are expected in 2025—or possibly sooner—causing a 38.5% loss against the US dollar over the year, to N1,142.5:US$1 at end-December,” the report said.

After pumping $7 billion to clear forex backlogs, the naira crashes Again in the official market reported that the naira paused its four-day recovery at the official and parallel markets after the CBN began to clear Forex backlogs, which are blamed for the naira crash.

Analysts believe the scarcity of Forex was responsible for the naira’s woes as importers and exporters scrambled for the few dollars available for transitions.

On Tuesday, November 7, 2023, the exchange rate between the naira and the dollar dropped from N869.91 to a dollar in the official market.


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Pascal Oparada (Business editor) Pascal Oparada is a Mass Communications Graduate from Yaba College of Technology with over 10 years of experience in journalism. He has worked in reputable media organizations such as Daily Independent, TheNiche newspaper, and the Nigerian Xpress. He is a 2018 PwC Media Excellence Award winner.

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