United States Bank, JP Morgan Projects What Dollar To Naira Rate Would Be By December

A United States multinational financial service firm, JP Morgan has projected that the naira would trade at N850/$ at the Investors’ and Exporters’ Forex window before the end of 2023.

The US bank, however, stated that the recent efforts to restore a flexible FX regime may be sustained given the willingness to accompany it with tighter monetary conditions.

“The interbank FX rate has risen in recent days to over 900, from 750, thereby significantly closing the gap to the parallel rate which is now just above 1,000.

“We expect USD/NGN to eventually move lower towards 850 by year-end as the combination of tighter policy, as well as more attractive rates and FX levels deter incremental dollarization and perhaps attract some foreign capital,” JP Morgan asserted on Wednesday.

Speaking further, JP Morgan noted that the authorities may need to consider further measures such as requiring commercial banks to adhere to regulatory limits on FX net open positions.

The financial institution noted that other measures include exploring the introduction of a cash reserve ratio on FX deposits as well as the issuance of dollar assets onshore.

On the fiscal side, the financial services firm advised the government to require all taxes to be paid in local currency.

It added that some of the measures may have already been incorporated in the Federal Government’s forthcoming revision of guidelines relating to the operations of the forex market.

JP Morgan also urged oil exporting companies to consider selling forex proceeds on the interbank market, rather than directly to the Central Bank of Nigeria.

The company also said the willing buyer-willing-seller nature of the foreign exchange market is contributing to the extreme volatility in the FX market.