A global rating agency, has projected that the Nigerian naira will end the year at N1,450 to a dollar.
According to Fitch Ratings, despite the volatility experienced by the naira since its floating in June 2023, there are expectations that the fluctuation will reduce by the third quarter (Q3) of 2024.
Gaimin Nonyane, director, Middle-East and Africa sovereigns, at Fitch Ratings, made this known during a post-sovereign rating webinar focused on Nigeria and Egypt.
Nonyane said; “The naira is still finding its feet. It is still in price discovery mode. So we would expect a lot of volatility in the near term,” she said.
“However, as I just mentioned, there is the expectation of multilateral donor funding coming in Q3 this year in addition to improved oil receipts. So that should help to reduce volatility somewhat by Q3 this year.
“We project that naira will average about N1,200/dollar this year and end the year around N1450/dollar. And in terms of next year, we see a gradual depreciation but it also depends largely on the foreign exchange reforms momentum.
“So, this is our baseline scenario on the basis that the momentum continues at the current pace.”
“Currently, the current account surplus is low, below one percent of the GDP, although they are experiencing some surpluses, it is still not significant in addition to that if we see a sustained reduction in inflation and greater stability in the foreign exchange markets, and one key factor is the tax revenue,” she said.
“We need to see stronger mobilisation of domestic non-oil revenue. So all of these combined collectively, it’s not one or the other, which could potentially lead to an upgrade.
“Low tax revenue base has contributed to the government’s very high interest-to-revenue ratio which currently stands at 38 percent and that is quite high.
“This is about four times more of the B rating median and forms a key rating consideration.”
