JP Morgan, an American multinational financial services firm, says the naira is expected to appreciate, and trade at about N600 to the dollar in the coming months.
The financial institution made the projection in a statement on Thursday.
On Wednesday, the Central Bank of Nigeria announced the unification of all segments of the forex exchange (FX) market, signalling that the exchange rate will now be decided by market forces.
The apex bank’s new policy followed a declaration by President Bolu Tinubu that the “monetary policy needs thorough house cleaning. The Central Bank must work towards a unified exchange rate”.
The naira, during trading hours, sold for between N750 and N755 per dollar before appreciating to close at N664.04.
Analysing the naira float, JP Morgan said although it would take a few days for the dollar/naira spot to stabilise, it fully anticipates 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 materialise 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.”
Chioma Kalu
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