Market News

Bloomberg reported that strategists at the 156 years old global bank saw naira as “undervalued”, thus offering attractive carry alongside real rates.

Deutsche Bank’s strategists noted that the naira, which has gained nearly eight per cent against the dollar through 2026, has a strong support from the country’s improving external position.

The bank however cautioned that rising government borrowing and fiscal pressures could threaten the currency’s positive performance, particularly as the country approaches its January and February elections.

“The principal risk to the outlook is from the fiscal side,” Deutsche Bank stated, pointing to the Debt Management Office’s bond issuance calendar for the quarter, which signals “elevated issuance levels.”

While the bank expected government spending to increase ahead of the elections, it sees less risk arising directly from the elections themselves, suggesting that fiscal policy and borrowing requirements could prove more significant to the naira’s outlook than the political transition.

A survey by Bloomberg last month had indicated that the naira was heading to its best performance in almost a decade as gains from economic reforms by President Bola Ahmed Tinubu continue to boost investors’ confidence and drive global capital inflows into the Nigerian economy.

Bloomberg indicated that the naira could record an average gain of 12 per cent this year, its strongest annual gain since at least 2018.

Analysts surveyed by Bloomberg agreed that the naira would continue to appreciate in the months ahead, extending its current year-to-date gain of 8.0 per cent by four percentage points to close the year with a full-year gain of 12 per cent.

Bloomberg highlighted that increased remittance inflows, higher oil revenues, and improved foreign exchange liquidity that arose from recent reforms have helped to stabilise the country’s foreign exchange (forex) position.

“Nigeria’s currency is headed for its best performance in almost a decade, as rising dollar inflows from higher oil prices and remittances help insulate the naira from political risks usually associated with its election season,” Bloomberg stated.

The Bloomberg survey expected naira to end the year at N1,290 per dollar from its N1,328.92 per dollar close on the survey date extending year-to-date gain of 8.0 per cent to almost 12 per cent by the year-end.