Naira will appreciate to 900/$ before December: Rewane’s FDC

The naira will strengthen to 900 per dollar on the parallel market before December, analysts at Financial Derivatives Company Limited have said.

The Nigerian currency fell to the N1,000/$ mark last month on the unofficial market amid the lingering scarcity of the greenback in the country. 

The naira was devalued by 40 percent in mid-June as part of efforts to attract investments into the country in a bid to revive the struggling economy. The foreign exchange reforms, which included allowing the value of the naira to be determined by market forces, led to a covergence of the official and parallel market rates but it was short-lived.

The reality “is that investors are confused as to why the economy is on the ropes after the lofty policy announcements by the president 120 days ago,” said the FDC analysts led by economic expert.

“Now Nigerians are in pain and awaiting the promised gains. The euphoria is giving way to frustration and anxiety,” they said.

The economic research firm put its purchasing power parity (PPP) value of the naira at N735.53/$, approximately 27 percent above the parallel market rate. “It shows that the naira is 1.3 percent undervalued rather than overvalued.”

It said, “Some economists have questioned the logic and sanity of our analysis, but that is what the PPP analysis discloses as of September 30. We believe that the naira will appreciate to N900/$ before December if and only if Nigeria comes clean with what its true external reserves minus its encumbrances are to the market. 

“However, we do not expect any tangible appreciation of the naira until 2024. We are encouraged by the pedigree of the new CBN leadership that they will stop doing the dumb things and start doing some smart things. But those are necessary and not sufficient to salvage the decadence.”