Economist Projects Naira Recovery Amid Cautious Optimism
Bismarck Rewane, a leading Nigerian economist, has projected a steady recovery for the naira by January 2025, forecasting that it will regain some strength against the dollar following a period of sharp depreciation. Rewane’s outlook, presented at the Lagos Business School Executive Breakfast Session titled ‘The Quadrangular Impact of the Trump Win on Nigeria’, comes amid signs of renewed market stability and an encouraging boost to Nigeria’s foreign exchange reserves.
Over the past week, Nigeria’s Central Bank reserves reached a 32-month high, rising by 68 basis points to $40bn. Yet, the naira has seen mixed fortunes: while the currency slipped by 70 basis points to N1,678.87/$ in the official Nigerian Autonomous Foreign Exchange Market, it recorded a marginal gain of 30 basis points at the parallel market, where it traded at N1,720/$.
Rewane, Managing Director of Financial Derivatives Company, expressed confidence that the naira would further stabilise in early 2025. “There is no economic justification for the naira to be trading at less than 30 per cent of its fair value within a year,” he said, identifying four key factors underpinning this anticipated recovery.
Firstly, Rewane noted that the narrowing gap between the official and parallel market rates has undercut speculative trading, a key driver of the naira’s earlier value erosion. He added that rising dollar inflows, bolstered by improved oil production and favourable prices, would aid stability. Furthermore, he expects the Central Bank of Nigeria (CBN) to implement a dollar auction programme similar to Treasury Bill sales, a move that could reduce market uncertainty. Lastly, he emphasised the need for greater transparency in forex market structures.
Rewane pointed out that exchange rate pressures are a primary cause of inflation in Nigeria, which remains persistently high. “A partial recovery of the naira,” he argued, “will help curb inflation and limit money market oversaturation.” He projected the naira trading below N2,000 by the first quarter of 2025, barring any premature rate cuts or investor withdrawals that might undermine the currency.
His projection aligns with recent assessments from the International Monetary Fund (IMF), which in its latest Global Financial Stability Report noted stabilising signs in the naira. The IMF attributed these improvements to CBN’s aggressive rate hikes and initiatives to clear foreign exchange backlogs. “Policy actions by local authorities have also resulted in positive developments; for example, rate hikes and clearing overdue FX obligations have helped the naira show more signs of stability,” the IMF report stated.
Despite recent headwinds, Rewane’s forecast is a marked shift from 2024, a turbulent year in which the naira joined the Ethiopian birr and South Sudanese pound as the poorest-performing currencies in Sub-Saharan Africa, according to the World Bank’s Africa Pulse report. With a 43 per cent depreciation by August, the naira faced relentless pressure from surging demand for US dollars in the parallel market, limited inflows, and delays in CBN’s forex disbursements.
As the naira shows signs of resilience, Rewane’s predictions offer a cautiously optimistic outlook for Nigeria’s economic landscape, suggesting that reform-oriented policies and market interventions could help steer the naira towards a more stable trajectory in 2025.
