Naira Reboots as Nigeria Tames Dark Economy Spurious FX Demand

Goldman Sachs Group Inc. says the naira, Nigeria’s currency, could extend gains to trade below N1,000 to the dollar, according to its latest report on Nigeria’s economic realities.

The firm stated that the continued surge of the Naira against the US dollar has made it the best-performing currency in April. Recall that the financial institution had projected that the local currency would appreciate N1,200 per US dollar within the next twelve months.

In an interview with Bloomberg, Andrew Matheny, an economist at Goldman Sachs, said the greenback could further trade below the projected N1,200. However, improved foreign currency supply has boosted the strength of the local currency across the markets.

The Central Bank of Nigeria (CBN) resolved to stabilize the naira and re-ignited a series of policy reforms helping the local currency regain its strength.

“This probably can run further; we would see an extension of the move to 1,000 and maybe even sub-1,000,” a Goldman Sachs economist said. Naira Suffers Big, CBN Goes Ballistic Against FX Whales

Matheny explained that since Goldman’s February forecast, “six weeks have gone by and they’re continuing to hold the line, so that’s encouraging”. The firm’s forecast comes amid a sustained rally of the naira at both parallel and official sections of the foreign exchange market.

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On April 8, the local currency strengthened to N1,120 per dollar at the black market and N1,230 at the official window. In the past months, the Central Bank of Nigeria (CBN) has taken measures to ensure the stability of the FX market.

The apex bank, on February 15, placed limits on the transfer of proceeds from crude exports by international oil companies (IOCs) to offshore parent company accounts. On March 20, the CBN announced that all outstanding FX obligations had been successfully settled.

In addition, the regulator directed all banks to stop the use of foreign currency-denominated collaterals for naira loans.

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