Naira beginning to limp out of doldrums – Rewane

There is the possibility of light at the end of the tunnel for the naira, with clear signs that the local currency is on a slow and painful path to recovery, says Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company (FDC) Limited.

“Evidently, there are signs that the naira is beginning to limp out of the doldrums, offering some hope to the mostly skeptical. In the last four weeks, the naira has gone from a sharp depreciation (N1,915/$) to a form of flat lining (N1,610/$) and is now on a slow and painful path to recovery”, said Rewane in a latest report made available to Blueprint.

He recalled that the massive foreign exchange depreciation has left Nigerians mostly feeling pessimistic, some skeptical, and others indifferent about the national currency. Many had written off the naira as a basket case, with the view that nothing good could come out of Nazareth. “However, Goldman Sachs, arguably the top global investment banking firm, forecasts that the naira will appreciate to N1,200/$ by the end of 2024.” Rewane added.

He said the improvement can be partly attributed to a number of factors, including the Central Bank of Nigeia (CBN)’s tight monetary policy, raising its Monetary Policy Rate (MPR) by 400bps, a marginal increase in forex supply, and the sanitization of the forex market, with the CBN barring 4,173 BDCs for non-compliance with regulatory provisions.

“This has offered flickers of hope at the end of a dark tunnel. However, rebuilding confidence is a slow, arduous, and excruciating process compared to the faster pace of the fall in investor confidence in the case of a dramatic event.

“Hence, the naira is not expected to recover as fast as it fell, and we forecast it to regain some of its lost value before the end of the second quarter of 20’24”, said the FDC report.

He advised that to further booster the naira,, the steps that should ikely to be taken include refinancing existing commercial debt obligations (external), an increase in oil production and revenues, a more efficient capture of diaspora remittances & investment flows, and further money supply tightening.