Nigeria’s exchange rate is expected to strengthen next year as inflation drops, says Bismarck Rewane, Parthian Partners’ non-executive director and Managing Director of Financial Derivatives Co Limited.
BrandSpur Nigeria reports that Rewane made this known during Parthian Partners 2024 Economic outlook session in Lagos.
According to Rewane, “Inflation is likely to drop in 2024 and could go as low as 17 per cent in 2025. Once inflation begins to decline, the exchange rate naturally appreciates because the exchange rate pass-through starts slowing down.”
However, he noted that inflation would continue to rise early next early due to market reforms and persistent currency volatility on the black market. “Base effects are expected to kick in by mid-year, with inflation moderating to an average of 23.6 percent in 2024 from an average of 24.4 percent in 2023.The decline in inflation will naturally lead to exchange rate appreciation,” he said.
Rewane also provided key perspectives on the economic landscape, highlighting trends, challenges, and opportunities for the upcoming year. While analysing the economic trends, he noted that the Naira fell by 26 per cent to N1,050/$ in 2023.
“There were higher energy prices with diesel price up by 34.01 per cent to N1050 per litre (year-on-year), fuel price up by 233 per cent to N630 per litre (year-on-year), while money supply growth went up 36 per cent (year-on-year) to N67.18 trillion in September,” he said.
He analysed crucial factors such as Gross Domestic Product (GDP) growth, inflation rates, and employment trends, offering an understanding of the economic landscape.
Also, he highlighted investment in Nigeria as a major driver contributing significantly to the country’s GDP.
Rewane also recognized the interconnected nature of the global economy, highlighting that Nigeria has a lot of international factors that could influence the trajectory of the economic outlook next year. This includes considerations of geopolitical events, trade dynamics, emerging market trends, and artificial intelligence (AI).
While he dwelt on AI and the rapid change the world is facing, he backed up his point, stating: “The world has changed; artificial intelligence and social media have made it easy. Now, there are no queues at banks, because all you need is your app.”
He added: “Investors are expected to deepen positions in securities that offer higher yields and companies with quality cashflows and realistic earnings goals.”
Further, he highlighted a salient point for investors. He stated: “Before you invest in a country, be sure that the indigenes are also investing in that country.”
Parthian Partners organised the session as part of its value-added services to clients to provide a valuable resource for businesses, investors, and policymakers seeking strategic guidance for the coming year.
Also, the Head of Research at Parthian Securities, a subsidiary of Parthian Partners, Seun Dosunmu, gave insight into the equities market, highlighting trends that will be replicated in 2024.
He advised investors to expect a high interest rate, recapitalisation of the banking industry, capital raising by some listed companies, mergers and acquisitions in the banking industry, prospective energy capacity increase, among other factors.
He mentioned some likely listings for next year as Dangote Foods, Dangote Refinery, and NNPCL.
