Cowry Asset Management Limited has projected that enhanced regional security and oil and gas sector are critical to stabilizing the Naira and reducing the volatility in the naira exchange rate in 2025.
The firm’s forecast in its report titled “Nigeria’s Macroeconomic and Sectorial Outlook in 2025: Looking Beyond the Rhetorics,” is driven by several underlying factors.
These include an expected surge in demand for foreign exchange from foreign portfolio investors whose investments will mature in 2025, a limited net foreign exchange position, and a potential rise in import activities.
In the report presented by Johnson Chukwu, Chief Executive Officer of Cowry Asset Management, the oil sector and regional security were highlighted as pivotal to stabilizing the naira.
The firm emphasized that Nigeria’s ability to boost crude oil production and address insecurity in the Northern regions would be crucial for maintaining exchange rate stability. “Efforts to mitigate insecurity and enhance crude oil production will significantly influence the naira’s trajectory in 2025,” the report noted.
Cowry Asset also projected that the naira could trade within a range of N1,400 to N1,900 against the dollar in 2025, assuming the foreign exchange market remains relatively undisturbed. This projection underscores the need for strategic policy interventions to navigate potential risks.
On monetary policy, the report anticipates that the Central Bank of Nigeria (CBN) will maintain a hawkish stance in 2025 to curb inflationary pressures and foreign exchange volatility.
However, Cowry Asset suggested that the CBN might consider reducing the Cash Reserve Ratio from its current level of 50 percent to alleviate liquidity constraints in the banking sector. This adjustment could enable banks to extend more credit to borrowers, fostering economic activity.
The equities market, according to Cowry Asset’s analysis, is expected to maintain resilience despite challenges such as investor concerns over valuation and rising interest rates.
The report predicts a continuation of the positive trend witnessed in 2024, driven by strong corporate earnings and dividend declarations, particularly in the banking, oil and gas, insurance, and agriculture sectors.
It also highlighted potential new listings, including the anticipated debut of the Dangote Refinery, as critical factors that could bolster investor sentiment.
In the bond market, the firm noted that high interest rates are likely to persist in 2025, reflecting the CBN’s commitment to tackling inflation. Rising auction stop rates are expected to attract investors to government debt instruments, although continued naira depreciation could exert pressure on yields as investors seek higher returns to offset currency risks.
The report further analyzed the Eurobond market, where global inflation trends and monetary policy shifts in advanced economies are poised to shape investor sentiment.
Nigeria’s fiscal management, including efforts to balance public spending and enhance foreign exchange liquidity, will play a critical role in determining market dynamics.