The Bank of America says Nigerian currency, the naira, has lost its value in the global market.
Analysts at the bank disclosed this following the government’s long-awaited foreign exchange reform.
“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’s analysts said.
Politics Nigeria reports that since Nigeria floated the naira on June 14, the currency has weakened by over 60 percent compared to the N460 per dollar rate it traded before the reform.
The Bank of America’s estimate of N680 indicates that the naira has become 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.
The bank further revealled that higher oil exports and a liberalised import regime would boost dollar inflows required to support the naira.
“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.
Recall that the Central Bank of Nigeria floated the naira the naira on June 14, 2023, a departure from years of the currency being pegged at a particular sum by the apex bank.
