Victor EzejaFollowing the floating of the naira in the foreign exchange market, the Bank of America (BoA) says the local currency has moved from being overvalued to undervalued.
The American multinational investment bank projects that the value of the naira would settle at N680 to the dollar by the end of 2023.
BOA’s postulation is contained in a note seen by Business Day.
The bank said: “We now see a USDNGN fair value of 680 per USD (previously 580). However, USDNGN is likely to trade above this level, with year-end 700, and a return to 650-680 in early 2024,” the Bank of America analysts.”
The recent foreign exchange reforms by the Nigerian government which unified all FX windows have seen the rate of exchange between the naira and foreign currencies such as Dollars, Euros, and Pounds, being determined by market forces.
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Economic analysts say the exchange rate would continue to fluctuate in line with market realities.
Some aver that this is a transition stage and that after a while, the value of the naira should be stronger.
Prime Business Africa reports that on Friday the Naira exchanged N769.25 for $1 at the investors and exporters window. This means a drop in value by 0.82 per cent when compared with N763 which it exchanged for the dollar on Tuesday, a day before the Eid-el-Kabir holiday that began on June 28.
The bank advised that with the current momentum gained by the reforms, President Bola Ahmed Tinubu’s next move should be to curb the oil theft that has remained largely responsible for the country’s continuous decline in oil revenue.
It added that if the government succeeds in ending oil theft by boosting security in the oil-producing areas, it could lead to an increase of Nigeria’s crude production from the current 1.2 million bpd, to 1.6 million barrels per day (bpd) in 12 to 18 months, barring OPEC limits.
“With the current momentum, Tinubu’s next big move should be to reduce oil theft – by reforming the security sector and involving host communities near the pipelines.
“In our view, increasing crude oil production to 1.6m bpd in the next 12 months is feasible and would be a structural improvement from current levels of about 1.2m bpd. If we include condensates, total oil production could rise from the current 1.4 million bpd to 1.8 million bpd in two years a level that Nigeria was producing pre-pandemic,” the bank said.
“Higher oil revenues and increased effort for non-oil revenue would ease the high debt service burden,” BOA added.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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