In the upcoming year, the Nigerian naira is expected to weaken to a weighted fair value of N1,804.45 as the volatility trend continues.
This is in line with a recent analysis titled “Beyond The Rhetorics: Transforming Reforms to Tangibles” from the investment and research firm Afrinvest, located in Lagos.
Although total foreign reserves have surpassed $40 billion, the research firm stated that “we anticipate that exchange rate volatility would persist in 2025 albeit at a modest pace.”
“Our prognosis is hinged on the belief that the CBN would be constrained from adequately meeting market demand on a sustained basis, as the recent FX reserves accretion were largely driven by inflows from inorganic sources, including those with stringent conditions on usability,” the document stated.
This forecast is made in light of the country’s 2025 budget, which makes the assumption that the value of the dollar will remain stable at N1,400.
According to statistics gathered from the FMDQ Securities, the naira ended the week on a good note, gaining from N1,548.40/$1 on Christmas Eve to N1,534/$1 on Friday, December 27.
In 2024, the local currency experienced its most severe decline, falling to nearly N2000 on the street in February compared to N1,700 on the official window.
The local unit has lost more than 40% of its value this year as a result of the federal government’s drastic reforms, which included floating the currency and devaluing the naira twice.
Since the FX BMatch was implemented in October, the market has been comparatively calm and transparency has been restored.
Maintaining the EFEMS and having larger net reserves, according to economists, could help reduce the pressure on the naira.
However, Afrinvest analysts said that if there are more inflows and liquidity, particularly from crude oil exports and remittances, the naira would strengthen.
However, the paper said, “we do not rule out the possibility of a significant rebound in the Naira, especially if accretion from organic sources-crude oil & non-crude oil exports, foreign capital flows, and diaspora remittances- takes a significant leap.”
