Tony Chukwunyem Citing what it describes as the “uncertainty surrounding foreign exchange liquidity inflows,” FBNQuest has said that it expects the current volatility in the exchange rate to persist this year with the naira ex – change rate ending the year at N1,317 per dollar. The firm, which stated this in its recently released report on its 2024 Economic Industry Outlook Research, highlighted the lack of liquidity in the foreign exchange market as one of key challenges that the country will grapple with this year.
In recent weeks, the naira has been trading at above N1,400 per dollar on the of- ficial market in recent weeks following a revision of the methodology used to set the exchange rate by the market regulator FMDQ OTC Securities Exchange. FBNQuest also stated in the report that the Central Bank of Nigeria (CBN) is likely to maintain a tight monetary policy stance through 2024 as part of efforts to tackle inflation, adding that the apex bank “will also aim to reduce excess naira liquidity to reduce the demand pressures on the FX market.”
Specifically, the firm called on the CBN’s Monetary Policy Committee (MPC), “to raise the policy rate by at least 100bps to 19.8 per cent before pausing its rate hikes.” The report partly read:”Against high inflationary pressures, the monetary authorities will maintain a tight monetary policy stance through 2024.
The CBN will continue its rate increase stance in 2024. The Bank will also aim to reduce excess NGN liquidity to reduce the demand pressures on the FX market We call for the committee to raise the policy rate by at least 100bps to 19.8 per cent before pausing its rate hikes. “Regarding market performance, we believe the market is significantly in overbought territory, and we expect a correction over subsequent months.
Unlike last year, we do not expect dividend yields to be favourable for investors considering how prices have moved. However, given the absence of investment alternatives, we expect funds to be rotated within equities in the year with pockets of profit taking at psychological resistance levels. Our base case expectation is a market return of+ 10 per cent y/y in FY ’24.
