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A recent report from the Bank of America has raised concerns about the future of Nigeria’s currency, the naira.
According to analysts at the bank, the naira has lost its value in the global market following the government’s foreign exchange reform.
The report suggests that the fair value of the USDNGN exchange rate is now 680 per USD, indicating that the naira is undervalued by about 12 percent.
“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.
Since the currency was floated on June 14, it has weakened by over 60 percent compared to its previous rate of N460 per dollar.
However, the bank remains optimistic that the value of the naira will strengthen and appreciate once rates are aligned and more USD is unlocked into the formal market.
The bank predicts that higher oil exports and a liberalized import regime will boost dollar inflows and strengthen the current account surplus.
“An addition of $12-13 billion on export revenues from higher oil production is moderated by a liberalised imports regime that could add $10 billion as non-oil imports increase. Still a net gain of $2-3billion that strengthens the current account surplus,” the analysts said.
This article was updated 2 months ago
