UK Firm Forecasts New Naira To Dollar Exchange Rate In 2024, Discloses What Will Continue To Drain The Naira

The Economist Intelligence Unit (EIU) has predicted that the Naira would depreciate to ₦2,381 per dollar.

The firm explained that continued high inflation, deficit monetisation, negative short-term accurate interest rates, low foreign reserves, and a backlog of foreign exchange requests would continue to drain confidence in the Naira despite a 45% devaluation in February.

Speaking via its Country Report for March 2024, the firm also revealed that the Nigerian government is expected to increase the Value Added Tax to 15% to fund deficit and service debts, including social and job creation projects.

The firm said the deficit could increase to five per cent of Gross Domestic Product (GDP) in 2024, above its 2023 estimate.

The EIU noted that the projection is expected to rise to an average of 4.5% of GDP between 2025 and 2028, above the legal limit of three per cent of GDP, representing an unusual tax period for Nigeria.

Before its revised forecast, the EIU had predicted that the Naira would rally at ₦2,000 per dollar in 2024.

It stated that Nigeria would use foreign loans to rebuild foreign reserves, adding that the Naira would stabilise at the end of 2024.

EIU said the exchange rate would become more potent if the Central Bank of Nigeria (CBN) tightened monetary policy more aggressively than expected.