JP Morgan Chase has raised concerns over Nigeria’s exchange rate, warning that a continued drop in oil prices below $60 per barrel could push the USD/NGN rate past ₦1,700/$1 and risk a current account deficit. Currently, the naira trades at ₦1,500/$1, reliant on foreign currency inflows.
The bank also noted that falling oil prices, now below $65 per barrel, threaten Nigeria’s 2025 budget, which is based on a $75 per barrel benchmark.Nigeria faces additional challenges as it falls short of its 2.06 million barrels per day oil production target, while the naira continues to weaken beyond the budgeted ₦1,500/$1 exchange rate.
Despite a Balance of Payments surplus of $6.83 billion in 2024, JP Morgan warns that further currency depreciation could push the naira to even lower levels. The central bank has increased dollar sales to stabilize the market and avoid conversion risks, though the naira has depreciated by 3.6% recently, with past fluctuations as high as 6.5%.JP Morgan estimates that the Central Bank of Nigeria (CBN) sold approximately $550 million in the past week, exceeding half of the $1 billion sold in March.
The bank advises the government to consider additional interventions, especially as foreign portfolio outflows are expected to increase. While foreign portfolio investments (FPI) are still above $10 billion, some may be locked in private placements and not readily available for market sale.
