FDC projects Naira appreciation in Q3, positive GDP growth

THE Financial Derivatives Company (FDC) Limited has projected that the local currency is likely to stop hemorrhaging very soon and begin to appreciate towards N670/$.

In last week’s edition of the Lagos Business School (LBS) Breakfast Session, Bismarck Rewane and the FDC Think Tank said, “There is a ray of hope for the economy if only some policy steps are taken immediately. One of which is protecting the oil pipelines (Nigeria loses approximately $1.3 billion per month).

“A combination of orthodox drone technology and the non-conventional tactics (Tom Polo project) could help protect approximately 400,000bpd of crude oil. The macroeconomic, fiscal and forex benefits to Nigeria are all Naira supportive and external reserves accretive.

“The good news is that with the slow and steady adjustment of the official I&E rate (N431/$), the Naira is likely to stop haemorrhaging very soon and begin to appreciate towards N670/$ – N680/$ in October.”

The Naira depreciated again to N710/$ in the parallel market. It reached N715/$ before appreciating to the N695/$ – N705/$ range.

The Naira/Dollar rate in the I & E is now at N434/$ with a marginal increase in forex supply.

Since the exchange rate pass-through to domestic prices is a major culprit behind spiralling inflation, FDC expects a noticeable moderation of Nigerian inflation in Q4 2022 (17.5 per cent).

The Naira on Friday lost slightly to the dollar, exchanging at N436.33 compared with N436.32 on Thursday at the official window.

The open indicative rate closed at N433.83 to the dollar on Friday.

An exchange rate of N437 to the dollar was the highest rate recorded within the day’s trading before it settled at N436.33.

Dealers said the local currency sold for as low as N425 to the dollar within the day’s trading.

A total of $66.02 million was traded at the official Investors and Exporters window on Friday.

Meanwhile, over the past month, Nigeria’s commercial banks have openly declared reduced limits on international transactions using Naira debit cards to $20 per month.

It means Nigerians would be unable to use their Naira debit cards to make any transactions more than $20 in a month.

This comes as a longstanding scarcity of foreign exchange continues to bite Africa’s largest economy and biggest oil exporter, Nigeria, despite the recent surge in global energy prices.

“We are also projecting that GDP growth in Q3 will be positive even though lower than Q2 (3.54 per cent).  With these imponderables and election uncertainty discounted, the economy may be on a slow mend path before Christmas,” FDC stated.