New report reveals why the naira will crash further by December

• The exchange rate between the naira and major currencies is expected to worsen during the festive season
• A new report by Meristem Security Limited said that the high demand for foreign currencies will depreciate the naira further
• The development comes as the naira depreciated to the lowest this week, hitting N1,690.32 per dollar in the official window

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

High demand for foreign exchange during Christmas will worsen the naira’s depreciation.

This is according to a project by Meristem Securities Limited in the Inflation Report released on Tuesday, November 19, 2024.

New prediction pegs the naira to dollar exchange rate Credit: Bloomberg/Contributor
Source: Getty Images

The naira sinks to the lowest in all markets

In the report, Meristem worried that the forex demand during Christmas would exacerbate the naira’s woes before the inflation rate.

The Nigerian currency has been in a freefall recently, hitting its lowest on Monday, November 18, 2024, when it exchanged for N1690.32 per dollar.

According to the report, food prices are expected to rise further in the near term due to increased transportation costs and consumer demand ahead of the festive season.

The report disclosed that further upward pressure on the core index will be caused by rising transportation from elevated fuel prices.

The report said:

“Additionally, heightened demand for foreign exchange during the festive season is likely to exacerbate the depreciation of the Naira, further inflating the prices of goods and services within the core inflation basket.”

Projections of naira’s depreciation

Many projections show that the naira will fall further on or before December.

Punch reports that the local currency performed poorly this November in all markets despite Nigeria’s foreign reserves rising to their highest levels in two years.

A recent BMI analysis said the naira is expected to depreciate to N1,993 per dollar by 2028.

The Business Expectations Survey of the Central Bank of Nigeria (CBN) shows that respondents expect the naira to fall in the current month and the next three months but rise in the next six months.

Bismarck Rewane, the Managing Director of Financial Derivative Company, projected that the naira will rise in January 2025 relative to its current trading position.

Expert task the CBN on managed currency float

Rewane disclosed that the FX rate is the main reason for inflation in Nigeria, stating that a partial rebound of the local currency will reduce inflation and curb money supply issues in the money market.

Janet Ogochukuwu, a senior banker and economist, corroborated the predictions, stating that they are familiar as the CBN has remained resolute about not intervening in the FX markets.

“There is a deliberate policy to allow the naira to float. However, we have maintained that no absolute currency floats anywhere. You can only have a managed currency floating,” she said.

Report predicts naira to dollar exchange rate

Legit.ng earlier reported that Veriv Africa, a data insights, research, and advisory firm, predicted that the naira could exchange at N1,930 - N2000 per dollar in a worst-case scenario in 2025.

The research firm disclosed this in its macroeconomic outlook, released over the weekend in Abuja.

Veriv Africa stated that the naira is projected to trade at N1,790 per dollar in the best-case scenario.

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Source: Legit.ng