Goldman Sachs has predicted that the Nigerian currency, the Naira, will appreciate against the US dollar and exchange at N1 200/$ in 12 months.
This was stated in a Goldman Sachs report titled Nigeria- Turning the Corner. The investment bank explained that its positive outlook for the Naira is hinged on favourable real rates, capital inflows, and evidence of a shift to a more orthodox policy set-up.
The report prepared by Goldman Sachs analysts outlines that over the past nine months, the Naira has experienced a cumulative weakening of 60-70%. However, it is expected that there will be a positive change for the Naira in the months ahead.
Part of the report reads:
“We think that Nigeria is turning the corner following its recent currency crisis.
“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.
“Nigeria is finally emerging from a period of monetary policy transition characterised by an absence of a credible policy anchor and deeply negative real interest rates
“We argued that addressing Nigeria’s currency and external liquidity crisis required positive real interest rates and capital inflows, conditions that were both present – at least in a limited form – for the first time last week on the back of the central bank’s monetary policy adjustments and bill issuance.
“In our view, this is the cue to turn constructive on the FX outlook, even if more decisive rate increases and confirmation of the policy shift are likely required to attract meaningful foreign inflows.
This is especially the case given that, in the near term, inflation on our estimates is likely to rise further on the back of lagged currency depreciation, and given that real interest rates are still comparatively low relative to elsewhere (most notably Egypt, which is likely to be a beneficiary of large inflows on the back of recent policy adjustments).
