Naira Stabilization Against Dollar Forecast for Q4 2024

Dollar Exchange Rate Implications for Naira Stabilization

The dollar exchange rate is central to understanding the future of the naira, which is projected to stabilize against the US dollar by the end of the fourth quarter of 2024. This forecast stems from a recently published macroeconomic report by First Securities Discount House (FSDH) Merchant Bank Ltd., titled Priorities for Economic Stability in the Short-Term.

Factors Contributing to Naira Stability

• Increased Forex Inflows: A rise in foreign exchange inflows is anticipated, driven by heightened policy rates and increased interventions from the Central Bank of Nigeria (CBN).
• Positive Impact from Dangote Refinery: The operations of the Dangote Refinery are expected to alleviate pressures on the forex market significantly.

Naira's Recent Performance Against the Dollar

Throughout 2024, maintaining stability against the dollar remains a challenge for the naira. Year-to-date, the exchange rate has depreciated by 69.9%, starting from N907.11/USD in January and deteriorating to N1,541.52/USD.

Market Trends and Future Expectations

Despite the naira's volatility earlier in the year, including a notable dip to N1,668.97 by September, the report emphasizes improving forex inflows, reflecting a trade surplus of US$8.9 billion for FY 2024. However, these inflows have only minimally supported the naira's appreciation against the dollar.

As we move forward, the high-interest-rate environment is attracting increased portfolio investments, which may play a role in stabilizing the naira against the dollar.