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Goldman Sachs Predicts Naira’s Gain Against US Dollar in 12 Months

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Goldman Sachs Predicts Naira Uptick

CEM REPORT, MARKET | The Nigerian naira appears poised for a rebound, according to a recent report by global investment bank Goldman Sachs. The bank predicts a significant appreciation of the naira against the US dollar within the next twelve months. This optimistic outlook comes amidst a series of policy reforms implemented by the Nigerian government and central bank aimed at stabilizing the country’s foreign exchange market.

Goldman Sachs foreign exchange strategists project a rise in the naira’s value to ₦1200/$ within the next year. This prediction hinges on recent policy changes, including an upward adjustment of interest rates by Nigerian monetary authorities.

Previously, unorthodox policy approaches had hindered the naira’s free movement in the foreign exchange market. However, the recent central bank actions, such as the Nl₦1.6 trillion bill auction, signify a shift towards a more market-friendly approach.


“These developments have prompted us to shift to a constructive outlook for the Naira, which our FX strategists expect to appreciate to NGN 1200 vs. the USD in 12 months,” Goldman Sachs said in a research note issued late last week.

“That said, the policy steps implemented to date are only a first step in the right direction, and we think more follow-through is required to achieve a durable macro stabilisation.”

Cracking Down on Naira Speculators

The outlook for the naira has brightened further due to a range of additional measures. These include a crackdown on the activities of street traders whose speculative trading had exerted downward pressure on the currency.

In late January, the central bank issued a directive to lenders, mandating them to maintain a net open position limit for foreign assets and liabilities within specific parameters. This move aimed to curb excessive speculation and promote stability in the foreign exchange market.

The result was a significant increase in dollar trading volume, exceeding $440 million on February 3rd, the highest level since June 2022.

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Improved Capital Inflows and Inflation Control

Goldman Sachs identified positive real interest rates – where the nominal interest rate exceeds inflation – and improved capital inflows as additional indicators that Nigeria is emerging from its recent currency crisis. The naira had previously suffered a significant devaluation, losing roughly 70% of its value against the dollar in the past nine months.

“Nigeria is turning the corner following its recent currency crisis,” the report states, citing the shift from negative real interest rates (where inflation outpaces interest rates) to positive real rates (where interest rates exceed inflation)

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However, recent trends paint a more promising picture. Foreign investor confidence appears to be on the rise, with participation in Nigerian assets exceeding $1 billion last month. Additionally, remittances from Nigerians abroad have seen a significant increase, climbing to over $1.3 billion.

However, the report also cautions that these initial steps require further action for long-term stability. “The policy steps implemented to date are only a first step in the right direction,” the report states. “We think more follow-through is required to achieve a durable macro stabilization.”

Challenges Remain: Long-Term Stability Requires Continued Reform

While Goldman Sachs’ forecast offers a positive outlook for the naira, they acknowledge that the implemented policy changes represent only the initial steps. The bank emphasizes the need for sustained efforts to achieve long-term macroeconomic stability.

Ensuring positive real interest rates and attracting continued capital inflows are crucial in addressing Nigeria’s external liquidity challenges and stabilizing the foreign exchange market.

The coming months will be critical in determining the effectiveness of the implemented reforms. If Nigeria can maintain its current trajectory, the naira could be well on its way to regaining lost ground and fostering a more robust and investor-friendly economic environment.

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