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"Expert Predicts Naira Comeback as CBN Slashes Customs Duty Rates"

In a bold forecast, renowned economist Bismarck Rewane has projected a significant recovery for the naira, predicting it will strengthen against the US dollar by January 2025. Rewane, who is the managing director of Financial Derivatives Company (FDC), made this revelation during his presentation at the Lagos Business Executive Breakfast Session, fueling optimism about the future of Nigeria's currency amid ongoing economic challenges.

A Ray of Hope for the Naira

The Nigerian currency has seen mixed performance in recent weeks, with fluctuations across all segments of the foreign exchange market. However, Rewane remains optimistic, stating that the naira’s current trading levels do not reflect its fair value. According to him, there is no economic justification for the naira to be trading at less than 30% of its fair value, particularly given the speculative activities contributing to the depreciation.

Rewane highlighted that the difference between the official exchange rate and the black market has nearly disappeared, a development he attributes to speculative round-tripping. This practice, where currency is bought and sold between different markets to exploit price differences, has caused a sharp drop in the naira’s value. He emphasized that with better market regulation and increased dollar availability, the currency could see a recovery.

FX Reserves Surge, Naira Faces Pressure

In the past week, Nigeria’s foreign exchange reserves have risen to $40 billion, their highest level in 33 months. Despite this, the naira’s performance has been under pressure. Data from the FMDQ Exchange revealed that the naira weakened against the dollar by 70 basis points, settling at N1,678.87 per dollar. Meanwhile, the parallel market saw a slight improvement, with the naira strengthening by 30 basis points to close at N1,720 per dollar.

Rewane believes that part of the solution lies in increased dollar sales by the Central Bank of Nigeria (CBN). He called for a more transparent FX market and suggested that the CBN adopt a dollar sales programme similar to the T-bill auction system to reduce market uncertainty and speculative behavior.

Naira to Stabilize Below N2,000 Per Dollar

Despite the current volatility, Rewane predicts that the naira will stabilize at below N2,000 per dollar, a significant improvement from its current state. He also pointed out that while a partial recovery of the naira would not entirely curb inflation, it would help control the oversupply of money in the market, which has been a major driver of inflation in Nigeria.

CBN Slashes Customs Exchange Rate

In a related move to support importers, the Central Bank of Nigeria announced a reduction in the customs exchange rate, which will now be set at N1,655.38 per dollar for clearing goods at the ports, effective November 11, 2024. This is a slight increase from the N1,680.90 per dollar rate previously quoted in August 2024, but it is expected to provide some relief to businesses dealing with rising import costs.

Rewane’s forecast offers hope for a more stable naira as 2025 approaches, but much will depend on the CBN's ability to maintain transparent policies and manage the supply of dollars in the market. All eyes will be on the central bank and its next moves to steer Nigeria’s currency toward recovery.