The Head of Market Strategy at Ebury has projected further devaluation of the Naira in its 2025 outlook for African currencies.
In an interview with CNBC Africa, Matthew Ryan explained that despite the expected devaluation, the Naira will not fall as it has in 2023 and 2024.
He further explained that Nigeria’s robust foreign reserves coupled with the narrowing of the chasm between the official market rate and the parallel market and oil prices at $74 are enough to ensure significant stability in the value of the Naira.
He said, “We do forecast continued devaluation in the Naira but at a smaller extent than what we have seen in the past. There are three main things that we look at when we do our forecast. First is the gap between the official and parallel market exchange rates- that has narrowed significantly over the past few months to around 5%.”
“FX reserves are high, at about 16 months of import cover. That should allow for plenty of intervention from the CBN to protect the currency and oil prices at around $74 per barrel are about sufficient to keep the Naira at current levels for now.”
Furthermore, the firm in its outlook for seven major African currencies painted a mixed picture with a positive outlook for some and a gloomy future for others.
According to a report by London-based Ebury, four out of seven monitored African currencies are expected to hold steady or gain in 2025, while the remaining three are projected to extend their losses.
The analysis considers each country’s economic fundamentals and the outlook for commodity prices.
Ebury anticipates losses for the Angolan kwanza, Ghanaian cedi, and Nigerian naira next year. Meanwhile, the South African rand is expected to continue its current rally, with the Kenyan shilling, Ugandan shilling, and Zambian kwacha “well positioned to maintain their value,” the report noted.
The firm projected the Naira to lose 2.4% of its value in the coming year and settle around N1,700 to the greenback.
In 2024 so far, the Naira has seen wild volatilities beginning the year at N907/$ and closing the third quarter at N1,541/$ on the official market. This represents a decline of almost 70% so far.
The situation is worse for the Naira on the parallel market as it closed September at N1700/$- the worst performance since its wild volatilities earlier in the year when the exchange rate in the parallel market crossed N1,700/$ on the parallel market.