According to JP Morgan, an American global financial services organization, the naira is likely to strengthen and trade at around N600 per dollar in the coming months.
The estimate was provided by the financial institution in a statement issued on Thursday.
The Central Bank of Nigeria announced on Wednesday the unification of all parts of the currency exchange (FX) market, indicating that the exchange rate will henceforth be determined by market forces.
The apex bank’s new policy follows President Bolu Tinubu’s announcement that “monetary policy requires thorough house cleaning.” “The Central Bank must strive for a unified exchange rate.”
On Wednesday, the naira traded between N750 and N755 per dollar before rising to N664.04.
JP Morgan said in an analysis of the naira float that, while it would take a few days for the dollar/naira spot to stabilize, it fully expects an initial overshoot towards the parallel market rate of below 750 or higher.
“While it will take a few days for USD/NGN spot to settle, we fully expect an initial overshoot towards the parallel market rate of -750 or higher, after which, we expect USD/NGN to settle in the high 600s over [the] coming months,” the statement reads.
“We remain long USD/NGN via non-deliverable forwards (NDFs) as well as OW emerging markets bond index global diversified (EMBIGD) index as we expect further positive catalysts to materialize in the near-term.
“We believe there is room for incremental positive surprises with respect to reform depth and execution speed. We had high expectations for the new administrations’ reform agenda, however, the speed of execution has proven to be a positive surprise.”
