JP Morgan forecasts the naira against the US dollar will reach N850 by December

Before the end of 2023, the US multinational financial services company JP Morgan predicted on Wednesday that the naira would trade at N850/$ at the Investors’ and Exporters’ Forex market.

The US bank did, however, note that given the readiness to pair it with tighter monetary conditions, the recent moves to reestablish a flexible FX system might be continued.

“In recent days, the interbank foreign exchange rate increased from 750 to over 900, narrowing the difference with the parallel rate, which is currently slightly above 1,000.

As a result of tighter policy, more appealing rates, and FX levels, JP Morgan predicted that the USD/NGN would finally go lower, towards 850 by year’s end, discouraging further dollarization and maybe drawing in some foreign capital.

JP Morgan claimed that authorities might also need to take additional steps, like mandating commercial banks to follow regulatory restrictions on FX net open positions, in addition to the policy initiatives.

Additional steps could involve issuing dollar assets onshore and investigating the implementation of a cash reserve ratio on foreign exchange deposits, according to JP Morgan.

Financially speaking, the financial services company recommended that the government mandate that all taxes be paid in local currency.

It further stated that the Federal Government’s upcoming revision of guidelines pertaining to the operations of the FX market may have already included some of the measures.

Additionally, JP Morgan advised oil exporting businesses to think about selling their foreign exchange earnings on the interbank market as opposed to the Central Bank of Nigeria directly.

The company added that a factor in the severe volatility of the foreign currency market is the willing buyer-willing seller aspect of the FX market.

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It stated that price discovery was hampered by the willing buyer-willing seller model and that the financial regulator ought to reevaluate the approach.

The bank also addressed Nigeria’s intention to relieve foreign exchange market liquidity in the coming weeks by obtaining $10 billion in foreign currency inflows.

It went on to say that the government might find it difficult to raise that much money since “Afrexim’s US$3 billion has been delayed for months, and Nigeria LNG Limited’s past dividends to the government have fallen well short of US$2 billion annually.”

As part of the upcoming new forex regulations, Aminu Gwadabe, President of the Association of Bureau de Change Operators of Nigeria, had urged the Federal Government to take securitization of domestic remittances into consideration.

He praised the Federal Government’s intention to operate a single exchange market in order to handle the forex problem in an exclusive interview with The PUNCH.

“The Federal Government’s plan to address the forex crisis is a good one and will yield results,” he declared. It will, of course, increase the worth of the local money. All we can do is wait to see how it is carried out, particularly with regard to measures aimed at fostering confidence.

But I believe they should look into securitizing diaspora remittances for Bureau de Change rather than securitizing inflows from NLNG. It has been carried out in South Africa, China, Malaysia, Lebanon, and other nations.

We must closely examine remittances from the diaspora. It’s substantial and stable. The government should concentrate on remittances from the diaspora; we should leave energy earnings alone. Compared to NLNG, it is roughly $20 billion a year, and that comes from our 14-year projected revenue.

He pleaded with the administration to carry that out through the Bureau de Change.