Goldman Sachs analysts Andrew Matheny and Bojosi Morule foresee a substantial rise in the exchange rate to N1,200/$ within a year, signaling a notable recovery from its previously undervalued status. This projection relies on Nigeria’s shift away from volatile monetary policies and deeply negative real interest rates, which have contributed to a significant depreciation of the naira over the past nine months.
Their report highlights a cumulative weakening of the naira by 60-70% during this period. However, they anticipate a reversal of this trend with the introduction of positive real rates and a move towards more conventional policy frameworks, marking the onset of Nigeria’s currency crisis recovery.
The analysts emphasize the necessity of sustained efforts for lasting macroeconomic stabilization. Yet, they caution that the success of their forecast hinges on Nigerian authorities’ ability to maintain orthodox monetary policies and implement sufficient tightening measures to attract necessary capital inflows.
Policy Shifts and Economic Implications
Commending recent monetary policy transitions under President Bola Tinubu, the Goldman Sachs analysts applaud the country’s pivot towards inflation targeting and a more adaptable exchange rate regime as positive developments. However, they stress the importance of continued vigilance and policy adherence to ensure the sustainability of Nigeria’s economic recovery.
