The Bank of America predicts that the naira will settle at N680 to the dollar by the end of the year, as the currency has moved from overvalued to undervalued following president Bola Tinubu’s government foreign exchange reform.
The bank sees a USDNGN fair value of 680 per USD, but it is likely to trade above this level and return to 650-680 in early 2024.
This was contained in a note by the bank as seen by BusinessDay.
According to the bank, “We now see a USDNGN fair value of 680 per USD (previously 580). However, USDNGN is likely to trade above this level, with year-end 700, and a return to 650-680 in early 2024,” the Bank of America analysts said.
“The caution is transition time, aligning rates and still to unlock more USD into the formal market will take some time. When the dust has settled, the value of the naira should be stronger and appreciating,” the analysts added.
The bank also notes that higher oil exports and a liberalized import regime can still result in consistent current account surpluses over the medium term. If successful, Nigeria’s crude production could increase to 1.6 million barrels per day (bpd) in 12-18 months, barring OPEC limits. Nigeria depends on hydrocarbons for 90% of its exports, at least half of fiscal revenues, and about 6% of GDP.
The bank believes President Bola Ahmed Tinubu’s next move should be to curb oil theft, which has plagued Nigeria.
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