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Goldman Sachs Forecasts Naira Gain Against Dollar

Toba Owojaiye reporting

Abuja, Nigeria

In a recent report dated March 7, 2024, Goldman Sachs, a leading global investment firm, has made a significant prediction regarding the Nigerian currency, the Naira. According to the report, Goldman Sachs anticipated a substantial appreciation of the Naira to N1,200 per dollar within the next 12 months. This projection is based on several factors outlined in their analysis.

“One key factor highlighted in the report is the Real Effective Exchange Rate (REER) basis, where the Naira appears undervalued when viewed in a historical context,” the report states.

Additionally, Truth Live News gathered that Goldman Sachs pointed to Nigeria’s account surplus, which stood at +3.5 per cent of GDP in the third quarter of 2023, and is expected to increase further above +5.0 per cent due to recent foreign exchange movements and associated import compression.

“We thus see reason for the naira to be undervalued, and we see it appreciating to N1,200 within the next 12 months,” the firm added.

Goldman Sachs acknowledged that while Nigeria is finally emerging from a period of monetary policy transition, characterized by a lack of a credible policy anchor and negative real interest rates, there have been recent positive developments. These include a shift towards positive real interest rates and a tentative policy shift by the Monetary Policy Committee (MPC) and the Central Bank of Nigeria (CBN).

“Despite these positive shifts, more policy actions are needed to achieve durable macro stabilization,” the report emphasizes.

The report also highlighted concerns about an incomplete monetary policy transition, which has contributed to the recent depreciation of the Naira.

“Following the dismissal of the previous CBN governor. Tinubu appointed new leadership at the CBN in September 2023 that signaled a shift to a more orthodox policy set-up,” the report observed .

While welcoming the new team’s communication regarding a transition to inflation targeting, flexible exchange rates, greater transparency, and a more arms-length relationship with fiscal authorities, Goldman Sachs emphasizes the need for more concrete policy measures.

Goldman Sachs’s forecast of the Naira appreciating to N1,200 against the dollar within the next 12 months reflects a cautious optimism about Nigeria’s economic prospects.

It comes as good news for the country but bad news for many elites and speculators who have saved their money in dollars.

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