Analysts fault FG’s exchange rate projection

The Nigerian Naira is projected to depreciate to N1,804 per dollar at the official market by 2025, Afrinvest has said in a new report.

The Federal Government is projecting N1, 5000/$ in its 2025 budget to the national assembly.

The report highlights persistent foreign exchange (FX) volatility and challenges faced by the Central Bank of Nigeria (CBN) in meeting forex demands as key drivers of the anticipated depreciation.

Afrinvest’s analysis suggests that the CBN may struggle to sustain market demand for forex due to a reliance on inflows from inorganic sources, many of which come with stringent conditions that limit their usability.

“We anticipate that exchange rate volatility would persist in 2025, albeit at a modest pace,” the report stated.

“Our prognosis is hinged on the belief that the CBN would be constrained from adequately meeting market demand on a sustained basis, as the recent forex reserves accretion was largely driven by inflows from inorganic sources.”

This projection contrasts sharply with the N1,500 per dollar benchmark proposed in the 2025 budget currently under consideration by the National Assembly.

Despite the dire forecast, the Naira showed signs of resilience last week. As of Friday, the currency appreciated at the official market, closing at N1,534 per dollar, while trading at N1,650 on the parallel market.

Dr. Olusegun Ajayi, an economist and forex specialist, believes that the Afrinvest projection underscores deeper issues within Nigeria’s forex management system.

“The projected depreciation of the Naira to N1,804 per dollar reflects a lack of structural reform in Nigeria’s forex policy. Unless the CBN diversifies its forex sources and strengthens reserves through organic means such as export revenue, the currency will remain vulnerable to external shocks,” Ajayi said.

Financial analyst and Afrinvest contributor, Ahmed Usman, pointed out the disparity between the government’s optimistic budgetary benchmark and the reality of market forces.

“Setting a budget benchmark of N1,500 per dollar may be more aspirational than practical. If the CBN cannot meet forex demands sustainably, market realities will drive the Naira closer to Afrinvest’s projection,” Usman noted.

Afrinvest’s report highlighted those recent gains in forex reserves were primarily driven by inflows from sources with stringent conditions, such as loans and external grants.

“This approach is unsustainable in the long term,” said Professor Maryam Ibrahim, a financial policy expert. “To stabilize the Naira, Nigeria must focus on boosting export revenue and reducing reliance on imports, particularly for essential goods.”

As 2025 approaches, Nigeria faces significant challenges in managing its foreign exchange market.

The Afrinvest projection serves as a wake-up call for policymakers to address structural weaknesses and adopt more sustainable strategies to stabilize the Naira.

The introduction of EFEMS has provided some stability; achieving long-term resilience will require bold reforms, targeted investment in export-oriented industries, and a commitment to reducing dependency on foreign inflows.