Fitch Ratings, an international credit rating agency, has projected that the Nigerian currency, the naira, will end the year at 1,450 to the United States dollar. This projection was made by Gaimin Nonyane, the Director of Sovereigns at Fitch Ratings, during a post-sovereign rating webinar focusing on Nigeria and Egypt.
Earlier in May, Fitch Ratings revised Nigeria’s Long-Term Foreign-Currency Issuer Default Rating Outlook to Positive from Stable, affirming the IDR at ‘B-’. This revision was based on reforms in the foreign exchange market, oil industry, and monetary policy over the past year.
Regarding the fate of the naira, Nonyane mentioned that it is still finding stability since its floating in June 2023, expecting volatility in the near term. However, with expected multilateral donor funding in Q3 and improved oil receipts, the volatility is expected to decrease. Fitch projects the naira to average about 1200/dollar for the year and end the year at around 1450/dollar, with a gradual depreciation expected next year depending on foreign exchange reforms momentum.
Nonyane highlighted factors that could lead to Nigeria being further upgraded, including sustainable recovery in the Central Bank of Nigeria’s foreign exchange position, sustained current account surpluses, reduction in inflation, greater stability in foreign exchange markets, and stronger mobilization of domestic non-oil revenue. However, challenges such as a low tax revenue base and high interest-to-revenue ratio need to be addressed.
In terms of foreign reserves, Nonyane mentioned that they have fallen from their peak in March but are expected to rise modestly by year-end due to a recovery in oil receipts, multilateral funding, and potentially commercial borrowing. However, she emphasized the need to sustain foreign exchange momentum, especially with rising external debt servicing obligations.
Multilateral funding is expected to play a significant role in Nigeria’s economic stability, with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, mentioning an expected $2.25bn package from the World Bank in a matter of weeks. This funding is aimed at supporting Nigeria’s efforts to stabilize its economy and spur growth.
