JP Morgan, a US multinational financial services firm, has projected that the Nigerian naira will trade at N850/$ at the Investors’ and Exporters’ Forex window by the conclusion of 2023.

The financial institution also believes that the recent efforts to restore a flexible foreign exchange regime may continue, accompanied by tighter monetary conditions.

The interbank FX rate has recently risen above 900, nearing the parallel market rate, which is slightly above 1,000.

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JP Morgan anticipates that USD/NGN will eventually trend lower towards 850 by the end of the year.

They attribute this to a combination of tighter policies, attractive rates, and FX levels that could discourage dollarization and potentially attract foreign capital.

JP Morgan suggests that, in addition to existing policy actions, authorities should consider measures like requiring commercial banks to adhere to regulatory limits on FX net open positions, exploring the introduction of a cash reserve ratio on FX deposits, and issuing dollar assets onshore.

On the fiscal side, JP Morgan advises the government to mandate all taxes to be paid in the local currency.

Some of these measures may have already been included in the Federal Government’s forthcoming revision of forex market operation guidelines.

JP Morgan also recommends that oil exporting companies consider selling forex proceeds on the interbank market, rather than directly to the Central Bank of Nigeria.

They attribute the extreme FX market volatility, in part, to the willing buyer-willing seller nature of the foreign exchange market and suggest a reconsideration of this strategy.

The bank further comments on Nigeria’s plan to attract $10 billion in foreign currency inflows in the coming weeks to alleviate foreign exchange market liquidity.

They highlight potential challenges given delays in expected inflows from Afrexim and the shortfall in Nigeria LNG Limited’s dividends to the government.

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Aminu Gwadabe, the President of the Association of Bureau de Change Operators of Nigeria, has commended the Federal Government’s plan to address the forex crisis through a single exchange market.

He suggests focusing on securitizing diaspora remittances for Bureau de Change operations rather than energy proceeds.