Naira Now Undervalued After Float, Bank Of America Says

The Nigerian naira has moved from being overvalued to undervalued following the government’s long-awaited foreign exchange reform, analysts at US-based Bank of America said in a June 28 note to clients as reported by Businessday.

The newspaper quoted the analysts saying, “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 of America (BOfA) analysts said. 

Since Nigeria floated the naira on June 14, the currency has weakened by over 60 percent compared to the N460 per USD level it traded before the reform. 

On Tuesday, the currency closed at N780 per USD, according to FMDQ data.

The Bank of America’s fair value estimate of N680 means the naira is now 12 percent undervalued.

“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. 

-Dailytrust