BMI, a research arm of Fitch Solutions, has projected that Nigeria’s Central Bank (CBN) will likely keep the naira stable at around N1,650 per dollar for the rest of 2024, despite growing pressures on the exchange rate.
This outlook is shaped by the widening gap between Nigeria’s official and parallel market exchange rates, which BMI analysts say could lead to a controlled depreciation of around N1,750 to a dollar by the end of 2025.
The analysts stated this in its Sub-Saharan Africa monthly outlook tagged ‘Fiscal Risks In SSA Persist Despite Return To Capital Markets’
BMI’s report suggests that while the CBN may loosen its firm hold on the naira, policymakers are not expected to allow the currency to slide as dramatically as it did in recent years.
In 2023, Nigeria experienced significant currency devaluation amid foreign exchange challenges and economic policy shifts, but BMI predicts more stability in the near term due to key structural changes in the economy.
A major factor anticipated to support the naira’s stability is increased domestic fuel production. The Dangote refinery, which started operations in 2024, will reduce Nigeria’s reliance on foreign exchange to finance petrol imports, decreasing demand for the dollar and easing pressure on the naira.
This shift is expected to contribute positively to Nigeria’s foreign exchange reserves, providing additional stability for the currency.
BMI analysts underscore that the CBN’s strategic adjustments will likely aim to strike a balance between maintaining investor confidence and mitigating inflation risks from further naira depreciation.
The Dangote refinery’s output will play a crucial role in buffering foreign reserves, which are essential for sustaining the naira and supporting Nigeria’s broader economic resilience amid global and domestic pressures.
By taking a more flexible but measured approach, the CBN is expected to manage the naira’s stability, reducing the likelihood of another steep depreciation and bolstering economic stability as Nigeria navigates the path toward long-term growth.
The Nigerian naira closed Friday at N1,678 per US dollar on the official market, maintaining its record-low level set on Thursday. This two-day trend underscores the sustained pressures facing Nigeria’s foreign exchange market.
The naira experienced significant intra-day volatility, reaching a high of N1,698/$1 and a low of N1,609/$1. Comparatively, Thursday saw an intra-day peak of N1,700/$1 with a low of N1,635/$1, marking some of the steepest fluctuations in recent weeks.
These elevated levels and wide swings point to persistent demand pressures on foreign currency, as businesses and individuals struggle to source dollars in a restricted supply environment. The demand has been fueled by various economic challenges, including high import costs, reduced foreign investment, and constrained dollar supply.
The pressure on the naira is even more evident in the parallel (black) market, where rates surged up to N1,730/$1 on Friday, according to sources.
The widening gap between official and parallel market rates reflects ongoing liquidity strains and heightened demand as businesses and consumers seek dollars outside the official channels. The gap underscores Nigeria’s ongoing foreign exchange challenges, including the limited availability of dollars through formal channels.
The Central Bank of Nigeria (CBN) has faced ongoing challenges in stabilizing the naira amid limited foreign reserves, fluctuating oil prices, and inflationary pressures.
The currency’s current strain indicates continued challenges for the CBN’s exchange rate management strategy, as market participants closely watch for any policy adjustments or interventions.