- Godman Sachs noted that the policy shift that is catalysed by the Monetary Policy Committee (MPC) decision and the Central Bank of Nigeria (CBN) bill auction last week that brought effective interest rates to 27 percent remained tentative
Goldman Sachs analysts, Andrew Matheny and Bojosi Morule, predict a Naira appreciation to N1200 per US dollar within the next twelve months.
They outlined this forecast in their recent analysis of Nigeria’s economic situation. Supporting the Nigerian government’s recent monetary policy to stabilize the Naira, which was deemed ‘cheap’ or undervalued, Goldman Sachs suggests that resolving the foreign exchange crisis is contingent on effective government implementation of monetary policies.
“We think the Naira looks cheap on a REER basis in a historical context. Additionally, the current account surplus was +3.5% of GDP in 2023Q3, and we expect it to increase above +5.0% on the recent FX moves and associated import compression. We thus see the reason for the Naira to be undervalued, and we see it appreciating to 1200 within the next 12 months,” they stated.
It pointed out that the country 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, adding that this had implied a volatile and sharp depreciation of the local currency in recent months and a cumulative 60-70 percent weakening over the past nine months.
Godman Sachs noted that the policy shift that is catalysed by the Monetary Policy Committee (MPC) decision and the Central Bank of Nigeria (CBN) bill auction last week that brought effective interest rates to 27 percent remained tentative, given the new team’s limited track record and ex-ante real rates that are now positive.