BY YEAR’S END, I &E FX RATE, ACCORDING TO CORONATION MERCHANT BANK, WILL BE N505 to $1

The market trading sector for investors, exporters, and end users that permits FX deals to be made at market determined exchange rate is known as the Investors & Exporters FX Window (I&E FX Window).

The Investors' & Exporters' FX Window (also known as the “I&E FX Window”) is a market trading area for Investors, Exporters, and End-Users that enables FX trades to be executed at exchange rates determined in accordance with current market conditions, ensuring efficient and effective price discovery in the Nigerian FX market. The Central Bank of Nigeria established the I&E FX Window.

Coronation Merchant Bank has predicted that the foreign exchange rate at the NAFEX/I&E window may drop to N505/$1 by the end of 2023 based on stable growth in non-oil exports boosted by the RT 200 FX programme, ongoing injections by the Central Bank of Nigeria (CBN) at an average 7% of total inflows on a monthly basis, and the cessation of fuel subsidy payments by end-H1 '23.

According to the bank, factors that are worrying for the economy include expected weak portfolio investment inflows because of negative real returns (yields vs. inflation), increased forex demand because of the need for safe-haven currency (USD) as a result of security concerns, and political risks associated with the general elections in 2023.

The bank also stated that a devaluation might occur in H2 2023 as a result of liquidity restrictions in its 2023 Economic Review and Outlook report, which focuses on trends for core macroeconomic indicators and pertinent emergent policy themes that will shape 2023.

The research, titled “Baton Hand-Off: Economic Headwinds and Expected Resilience,” examines, among other things, sectoral trends, inflationary pressures, domestic oil market dynamics, forecasts for currency rates, and global economic headwinds and growth prospects. The paper delves deeply into the possible repercussions of the upcoming shift in administration.

The MD/CEO of Coronation Merchant Bank, Banjo Adegbohungbe, commented on this survey by saying that the impact of recent global economic shocks on the Nigerian economy were widespread in 2022 and are projected to persist in 2023. There will, however, be chances to spur new growth, especially in the second half of the year. This study is an effective tool for decision-makers that will help our clients, investors, and stakeholders navigate the current economic environment and accomplish their own strategic goals.

Chinwe Egwim, the chief economist at Coronation Merchant Bank, stated that 2023 would bring a variety of economic conditions. We anticipate that both advanced and emerging economies will continue to experience rising inflation. Given that the inflation outlook across markets indicates a gradual deceleration in H2 2023, the consequent effect of monetary policy tightening is likewise anticipated to persist although at a slower rate.

For Nigeria, FX liquidity restrictions are expected to continue for the foreseeable future. Election year raises concerns about demand-pull inflation as a result of anticipated electioneering spending (naira circulation).

However, putting into practice the recently announced naira redesign policy could help to reduce this inflation risk.

Concerns exist regarding the continuation of policies following the election as well as the anticipated slowdown in economic activity following the transition period. In 2023, it is anticipated that Nigeria's GDP will continue to increase, but more slowly.