Goldman Sachs Sees Naira at N1,200/$1 in 12 Months’ Time

By Adedapo Adesanya

Global investment bank, Goldman Sachs, has forecast continued appreciation for the Naira against the US Dollar in the next 12 months, with a rate of N1,200 in the short term on the back of policy reforms that could support the currency’s recovery.

According to a research note, the lender noted that the upward interest rate adjustment and a recent N1.6 trillion bill auction by the Central Bank of Nigeria (CBN) signalled that the country is turning the tables on a previous unorthodox policy regime that hindered the Naira from trading freely.

“These developments have prompted us to shift to a constructive outlook for the Naira, which our FX strategists expect to appreciate to N1,200 versus the USD in 12 months,” Goldman Sachs said.

“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.”

The Naira had found some solace after some unorthodox measures were introduced in the country, including clampdowns on street traders, which widely believed speculative activities have pressured the currency for long.

Also, the CBN ordered lenders to ensure that the net open position limit of their foreign assets and liabilities does not “exceed 20 per cent short of 0 per cent long of shareholders’ fund unimpeded by loss,” giving them only 24 hours to comply with the directive.

Also, the CBN announced that supply in the currency market, more than doubled, with trade volume hitting $440 million on February 3, the highest level since June 2022.

Goldman Sachs noted that improved capital inflows and the recent shift from negative real rates (a situation where the inflation rate surpasses the nominal interest rate) to positive real rates (where the nominal interest rate exceeds the inflation rate) indicate that “Nigeria is turning the corner following its recent currency crisis.”

Foreign participation in Nigerian assets surpassed $1 billion last month in a mark of increasing confidence of international investors in the fixed-income market, while remittances from abroad climbed more than four times to $1.3 billion.

Goldman Sachs stated that positive real interest rates and capital inflows are central to tackling Nigeria’s external liquidity crisis and challenges in the foreign exchange system.