Another Naira devaluation is due in 2023 according to signals from the Naira FX Futures market to allow the exchange rate to reflect current realities.
Non-deliverable Forwards at the Naira settled OTC FX futures market as of December 30th , 2022, reveals that contracts maturing in one year closed at N529.55/USD.
This reflects investors’ pessimism about the direction of the Naira’s value against the greenback, according to analysts at Meristem Securities.
“Considering that the Naira has been devalued in 4 out of the past five years (either at the official or I&E Window), the high likelihood of further strains in FX supply, declining foreign investor confidence in the capital market and other weak macroeconomic variables, signals the possibility of another currency devaluation,” the Meristem analysts said.
A worst case scenario for the Naira in 2023 would see it devalued to as low as N511- N520 per dollar on the official market as another shock to global oil market occurs reducing oil prices while production also remains low
This would mean the Current account returns to deficit balance, while capital flow reversal persists.