Fitch Ratings, the international credit rating agency, has forecasted that Nigeria’s currency, the naira, will stabilize at 1,450 against the United States dollar by the end of the year.

This prediction comes amidst ongoing reforms in the foreign exchange market and other sectors of the Nigerian economy.

Gaimin Nonyane, Director of Sovereigns at Fitch Ratings, revealed this projection during a post-sovereign rating webinar on Tuesday, which focused on Nigeria and Egypt.

Nonyane highlighted the recent revision of Nigeria’s Long-Term Foreign-Currency Issuer Default Rating to Positive from Stable by Fitch Ratings in May.

The agency affirmed the IDR at ‘B-‘, citing reforms in the foreign exchange market, oil industry, and monetary policy over the past year as contributing factors to the positive outlook.

Speaking specifically about the trajectory of the naira, Nonyane acknowledged the currency’s recent struggles since its floating in June 2023.

He stated, “The Naira is still finding its feet. It is still in price discovery mode. So we would expect a lot of volatility in the near term.”

However, he expressed optimism regarding the potential impact of anticipated multilateral donor funding in the third quarter of the year, coupled with improved oil receipts, in reducing volatility.

Fitch Ratings projects that the naira will average about 1,200 per dollar throughout the year and ultimately stabilize at 1,450 against the dollar by the end of 2024.

Looking ahead to the following year, Nonyane noted a gradual depreciation of the naira, contingent upon the momentum of foreign exchange reforms.

Regarding the possibility of further upgrades for Nigeria, Nonyane outlined key factors that could contribute to a sustainable recovery, including a robust foreign exchange position, sustained current account surpluses, reduced inflation, greater stability in foreign exchange markets, and stronger domestic non-oil revenue mobilization.

However, he emphasized the importance of addressing Nigeria’s low tax revenue base, which currently poses challenges for fiscal sustainability.

In terms of the oil sector, Fitch Ratings anticipates a recovery that will support the country’s current account in the short term.

The agency also expects an increase in oil refining capacity with the ramp-up of the Dangote refinery, which is projected to commence operations later this year or early next year.

This development is expected to reduce transport costs, lower refined oil imports, and ease foreign exchange demands.

Despite recent fluctuations, Nigeria’s gross foreign exchange reserves have remained relatively stable, hovering around $32.7 billion.

Fitch Ratings projects a modest rise in reserves by year-end, driven by oil receipts, multilateral funding, and potential commercial borrowing. However, the agency warns of external risks, particularly concerning the significant portion of reserves tied up in bank swaps.

The anticipated $2.25 billion funding package from the World Bank, expected to be considered by the board in the coming weeks, underscores Nigeria’s efforts to bolster its economy.

This funding, characterized by its low interest rates and lack of conditionalities, reflects international confidence in Nigeria’s economic policies and reforms.