Chief Investment Officer at VNL Capital Asset Management, Ifeanyi Ubah, has expressed optimism about the outlook for the naira, saying the local currency is on an appreciation trajectory despite the sharp decline in foreign exchange turnover.
Speaking during an interview with ARISE NEWS on Saturday, Ubah said the recent decline in FX turnover should not be interpreted as weakening demand for foreign exchange but rather as evidence of reduced speculative activity and improving market stability.
On the decline in FX turnover, he said: “The turnover wasn’t sustainable initially. But as we see it crash, it also mean good news for our currency appreciation.”
Ubah explained that tighter monetary policies and reduced incentives for investors to hold foreign currency have significantly lowered participation in the foreign exchange market. “There’s nothing really incentivising big players from holding foreign currency anymore. It’s largely a reduction in participation.”
Speaking on the broader economic outlook, Ubah said the naira is showing signs of strengthening, supported by improvements in Nigeria’s external trade position.
“The bigger picture is that the naira is now looking like it’s on an appreciation trajectory and Nigeria is becoming a net exporter.”
Projecting the currency’s performance, Ubah said the naira could continue to appreciate if current monetary policies remain consistent and global economic conditions remain favourable.
“Best-case scenario, we could see the naira appreciate towards the ₦1,200 to ₦1,100 region by the end of the year or early next year if everything holds steady.”
Commenting on renewed geopolitical tensions in the Middle East, Ubah warned that while higher oil prices could strengthen Nigeria’s earnings as an oil-exporting nation, prolonged conflict could also sustain inflationary pressures. “The war not being over is negative because inflation remains a major bottleneck, even though higher oil prices benefit Nigeria as an oil-exporting country.”
Speaking on Nigeria’s foreign reserves, Ubah attributed the recent increase to stronger oil prices and policy measures aimed at reducing speculation in the foreign exchange market. “The net positive on fiscal and monetary policy, alongside higher oil prices, has given us room to strengthen our foreign reserves.”
Assessing the Tinubu administration’s economic reforms, Ubah said key macroeconomic indicators point to steady progress, although the benefits have yet to be fully felt by ordinary Nigerians.
“The data points to a growing economy, but policy impacts take time before they are fully felt by the average Nigerian.”
Concluding, Ubah cautioned that despite easing inflation, Nigeria must remain vigilant as rising food prices and persistent global geopolitical tensions continue to pose risks to the country’s economic outlook.
“We’re not out of the woods yet because increasing global tensions and food inflation remain significant concerns.”
Goodness Anunobi
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