Sure, I’ll rewrite the blog post in simpler terms so that it’s easy for everyone, including kindergartners, to understand. Here we go:
Experts at United Capital Plc think Nigeria’s money exchange rate will become steady. They believe it will be between N1,423.26/$ and N1,550/$ by the end of 2024.
This guess was shared in their HY-2024 Economic Outlook Report, called “Balancing Act: Nigeria’s Path to Economic Stability.”
The experts feel good about Nigeria’s exchange rates in the second part of 2024. They believe that the Naira (Nigeria’s money) will get stronger because of some good things happening in the economy.
Two important things they mentioned are:
– The start of local petrol supply from the Dangote refinery in July, which will help reduce the need to import petrol.
– Keeping tight control on money to fix the interest rates.
“We think exchange rates will be steady, around N1,423.26/$ to N1,550/$ by the end of 2024,” the experts said.
Slowing Down Inflation
They also said other things helping include:
– The slowing down of inflation (rising prices).
– The World Bank giving $750 million to temporarily boost reserves.
The experts believe these things will increase the number of dollars available, making investors happy and helping the Naira get stronger.
Volatile First Half of 2024
They said that in the first half of 2024, the Naira was very shaky. Much of this was because in January 2024, the Central Bank of Nigeria (CBN) changed how they set the official exchange rate.
“The Naira got weaker by 34.33% in the official market, from N988.46/US$ on January 2, 2024, to N1,505.30/US$ by June 28, 2024. It also fell by 21.05% in the parallel market, from N1,200/$ to N1,520/$ in the same time,” they explained.
They said the changes made the difference between official and parallel markets smaller and increased market activities, showing some progress in making things better.
However, after the devaluation, the Naira didn’t stop getting weaker. This was because there were too many requests for dollars after CBN cleared a backlog, and Nigeria still relied on imported petrol.
They said for these improvements to last, Nigeria needs more dollars coming in through better oil production and more export earnings.
“If these important dollar inflows don’t happen, CBN’s efforts might not work well over time, making the Naira weaker without strong outside help,” the experts warned.
Nigeria’s External Reserves
They also had a good outlook for Nigeria’s external reserves for the second half of 2024, thanks to several positive factors.
They said improvements in remittances (money sent back home), stability in the oil sector, and big inflows from the World Bank, including a $1.50 billion budget boost, will help raise reserves.
Moreover, potential Eurobond issues and FX-denominated local debt will help the Central Bank of Nigeria (CBN) keep the foreign exchange market stable.
“Looking forward, we expect growth in capital imports because of high-interest rates and the CBN’s strict money policies. But worries about fiscal sustainability might make foreign investors cautious, and FDI (Foreign Direct Investment) inflows might stay small without major infrastructure reforms,” they said.