Bank of America Report Highlights Naira’s Global Depreciation
According to the Bank of America, Nigeria’s currency, the naira, has experienced a decline in its value on the global market. This revelation comes in the wake of the government’s highly anticipated foreign exchange reform.
The bank’s analysts disclosed their findings, stating, “We now project a fair value of 680 naira per USD (previously 580). However, it is likely that USDNGN will trade above this level, reaching 700 by year-end, and subsequently returning to a range of 650-680 in early 2024.”
Politics Nigeria reports that since the naira’s floatation on June 14, the currency has depreciated by over 60 percent compared to its previous exchange rate of N460 per dollar prior to the reform.
Bank of America’s assessment, valuing the naira at N680, indicates an approximate undervaluation of 12 percent.
Bank of America Anticipates Naira’s Potential Strengthening
The analysts at Bank of America emphasized that although it may take some time for the transition and alignment of rates, they anticipate a stronger and appreciating value for the naira once the dust settles.
The bank further revealed that increased oil exports and a more open import regime would contribute to a higher influx of dollars, which would support the naira. They projected an additional $12-13 billion in export revenues from enhanced oil production, which would be partially offset by a liberalized import regime that could add $10 billion due to increased non-oil imports. Nonetheless, this would result in a net gain of $2-3 billion, strengthening the current account surplus.
It is worth noting that the Central Bank of Nigeria adopted a new approach by floating the naira on June 14, 2023, breaking away from the previous practice of pegging the currency to a fixed exchange rate set by the central bank.
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