Naira seen appreciating to N1200 against dollar in 12 months, says Goldman Sachs

As for the Naira vs the dollar, Goldman Sachs predicts that it would strengthen to N1,200 in the upcoming year.

A Goldman Sachs research titled Nigeria-Turning the Corner made this claim.


As per the paper, the prediction is contingent upon a trifecta of favorable real rates, capital inflows, and indications of a transition towards a more conventional policy framework.

"We think that Nigeria is turning the corner following its recent currency crisis," the statement read.

"Our FX strategists expect the Naira to appreciate to NGN 1200 vs. the USD in 12 months, which is in line with our constructive outlook for the currency," the study stated in response to these developments.

“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,” it further stated.

According to the report, the Naira has depreciated erratically and sharply in recent months, weakening the currency by a total of 60–70 percent over the previous nine months due to the absence of a credible policy.

The Monetary Policy Committee of the Central Bank of Nigeria raised interest rates last month by 400 basis points, from 18.75 percent to 22.75 percent.

It stated that "given the new team's limited track record and ex ante real rates that are now positive but still do not compare favorably to elsewhere (notably Egypt)," the policy shift sparked by the MPC decision and central bank bill auction last week, which raised effective interest rates to 27 percent, is still tentative.


Investors are swarming to Nigerian government debt instruments in response to the benchmark interest rate increase, driving yields to all-time highs and causing a spike in remittances from the diaspora to $1.3 billion in February from $300 million in January.


 However, the Goldman Sachs research noted that further action is needed to establish a long-lasting macro stabilization, and that the policy measures put in place thus far are merely a first step in the correct direction.

It stated that failure on the part of the authorities to implement the change to a more conventional monetary setup would be the primary risk to its outlook.


"Our more optimistic outlook is primarily jeopardized if the authorities fail to implement the transition to a more conventional monetary framework as they have proposed and fail to implement the necessary policy tightening to draw in the capital inflows needed to alleviate fiscal and external financing constraints," the spokesperson stated.