US-based investment bank Goldman Sachs has forecasted an optimistic outlook for the Nigerian currency, the Naira, predicting it will appreciate against the US dollar and reach N1,200/$ within the next 12 months.
The prediction comes amidst recent struggles of the Naira against the dollar, with the Nigerian currency currently exchanging above N1,600 in both official and black markets.
Goldman Sachs outlined its positive forecast in a report titled “Nigeria – Turning the Corner,” citing factors such as favorable real rates, capital inflows, and a shift towards a more orthodox policy framework as reasons for the expected appreciation of the Naira.
According to analysts at Goldman Sachs, the Naira has experienced a cumulative weakening of 60-70% over the past nine months. However, they anticipate a turnaround in the currency’s fortunes in the coming months.
“We think that Nigeria is turning the corner following its recent currency crisis,” the report stated. “These developments have prompted us to shift to a constructive outlook for the Naira, which our FX strategists expect to appreciate to NGN 1,200 vs. the USD in 12 months.”
The report highlighted the importance of positive real interest rates and capital inflows in addressing Nigeria’s currency and external liquidity crisis. It also emphasized the need for more decisive policy measures to attract meaningful foreign inflows.
Goldman Sachs views the current valuation of the Naira as undervalued on a Real Effective Exchange Rate (REER) basis, considering the country’s current account surplus and expectations of further improvement.
In response to the Naira’s recent struggles, the Nigerian government and the Central Bank of Nigeria (CBN) have implemented several measures and reforms aimed at supporting the currency. These include revoking Bureau De Change licenses, tightening regulations on cryptocurrency firms, increasing interest rates, and selling government securities to boost dollar inflows.
While these measures have contributed to a reduction in the Naira exchange rate from its peak, they have yet to fully meet the budget dollar benchmark of N800 per dollar.
In a related development, Pastor Enoch Adeboye of the Redeemed Christian Church of God (RCCG) recently prophesied the potential for the Naira to bounce back against the dollar, offering hope for a positive turnaround in the currency’s fortunes.
