IN 2023, THE NAIRA IS ANTICIPATED TO INCREASE TO N680 PER $1.

According to Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited, the value of the Nigerian naira is expected to rise to N680 per dollar this year.

As of Monday, January 9, 2023, the black market, is trading the naira for the dollar at N743/$1.

Rewane stated in his monthly presentation for December 2022, headlined “An Odd Year that Feels Like a Leap Year,” “Exchange rate adjustment in 2023 is unavoidable.”

The difference between the Investors and Exporters (I&E) forex (I&E FX) and the parallel market will close as a result of the exchange rate adjustment.

Due to increased demand, there is now a larger difference between the official and black-market FX rates for the naira and the dollar.

On Monday, the dollar was at N461.67 on the official market but the naira closed at N743 per dollar on the black market. This reveals a difference between the two markets of N281.33 for every dollar.

Rewane claims that when administrative constraints in the FX market increase, the premium in the parallel market also rises, diverting investment flows away from the market.

He pointed out that Nigeria's external reserves, which provide the Central Bank of Nigeria (CBN) with the means to protect the naira, fell from their all-time high of $62.08 billion in 2008 to just $36.96 billion in December 2022.

Reduced capital inflows, which fell to $3.1 billion in the first quarter of 2022 (H1'22) from $24.0 billion in the full year (FY) 2019, as well as a shortfall in remittances from the diaspora, which fell to $10.1 billion (H1'22) from $23.8 billion in FY2019, put pressure on the country's external reserves.

According to data from the CBN, foreign exchange reserves decreased by 8.44 percent annually to 37.08 billion as of December 30, 2022, from the $40.50 billion recorded at the start of 2022.

The official sales into Nigeria's official reserves has continuously decreased from over $3 billion per month in 2014 to zero dollars, according to Godwin Emefiele, governor of the Central Bank, who made this statement in November 2022.

A severe squeeze on the Nigerian FX market was putting pressure on reserves and suppressing the value of the naira.

On the basis of the balance of payments for the 12 months ending in June 2022, total reserves at the end of December 2022 were sufficient to support imports of goods for 8.4 months and 6.4 months, respectively.

FBNQuest noted that “for a more true picture, we must adjust the gross reserve amount (and the import cover) for the pipeline of delayed external payments.”

The CBN was able to keep the naira largely constant on the official market despite the pressure from demand, according to a report by FBNQuest.

Despite the US Federal Reserve's, the value of the naira relative to the US dollar decreased by only around 9% last year. According to the research, this is in contrast to how most other currencies have performed globally. Rewane stated that “currency constraints will persist as high global interest rates continue to restrain capital inflows,” noting that Ahmed Tinubu, the APC presidential candidate, had vowed that export promotion will boost the naira.