N1,100/$1: Agusto & Co Predicts Naira/Dollar Convergence Rate by End of 2024, Gives Reason

N1,100/$1: Agusto & Co Predicts Naira/Dollar Convergence Rate by End of 2024, Gives Reason

  • The continued decline of the naira against major currencies in Nigeria is a cause for concern to the government and Nigerians in general
  • Agusto & Co has predicted that the forex crisis in Nigeria may eventually stabilise by the end of the year
  • The agency noted that it expects the CBN to raise MPR by around 19%, given the need to manage inflation

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

Despite the ongoing foreign exchange crisis in Nigeria, Agusto & Co has given an optimistic projection for Nigeria's naira/dollar exchange rate.

The Pan-African credit rating agency forecasts that the exchange rate could converge at N1100/$1 at the official market at the end of 2024.

The agency gave this prediction in its monthly newsletter for January titled, "2024: A year of reckoning, turning points and balancing acts".

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Agusto & Co forecasts exchange rate of N1,100/$ at the official market
Agusto & Co noted that capital inflows would likely remain constrained on low investor confidence as forex illiquidity lingers. Photo credit - Photo credit: Anderson Ros Photography Inc, Crime Channel
Source: UGC

Data from FMDQ showed that on Friday, February 23, the naira depreciated against the US dollar at NAFEM by about 6%, or N94.19, to close at N1,665.50/$1, compared to the N1,571.31/$1 rate the previous day.

Agusto & Co optimistic about naira recovery

The report covered several sectors of the economy, including GDP growth, inflation rate, and the forex crisis, which is one of the most challenging issues in the country at the moment.

Agusto & Co stated that despite expectations of higher export earnings from improved oil production and still high oil prices, there is a risk that the naira may depreciate further.

It, however, noted that capital inflows would likely remain constrained on low investor confidence as forex illiquidity lingers.

The agency said:

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“The CBN has committed to intermittently boost forex liquidity and we believe that the recent receipt of a $2.25 billion forex support facility from Afreximbank, anticipated inflows from the World Bank and proceeds from dividend securitisations from the NLNG will support in this regard."
"This amount represents 12.5 per cent of the estimated $18 billion inflow expected from various external sources. We believe that achieving 50 per cent of this target in 2024 and maintaining crude oil output at 1.5mbpd will be crucial in restoring FX stability in the near term.”

The agency further stated that the central bank purportedly repurchased a segment of the expired currency forward obligations totalling close to $2 billion during the final quarter of 2023.

Additionally, it made a disbursement of $61.64 million to international airlines, which were reportedly owed around $700 million by the conclusion of November 2023.

It added:

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"As a result of the aforementioned, we expect less volatility than in 2023 and forecast a Year-end exchange rate of N1,100/$ at the official market."

As per the agency's assessment, a significant concern regarding the forecast is the potential for swift currency devaluation and the CBN's potential return to more intense exchange rate management in order to stabilize it.

Moghalu speaks on solution to naira's fall

In related news, Legit.ng reported that Kingsley Moghalu, the ex-deputy governor of the CBN, has outlined a strategy for the potential recovery of the naira.

In his address during the 29th annual Nigerian Economic Summit held in Abuja on Tuesday, October 24, 2023, Moghalu emphasised that the key to resolving the naira's issues lies in transforming the Nigerian economy into a productive and export-oriented one.

The former presidential candidate stressed Nigeria's need to formulate a comprehensive and practical plan to enhance the naira's stability.

Source: Legit.ng

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