The Bank of America (BoA) has stated that it considers the Nigerian currency, the naira, to be undervalued after the government’s recent foreign exchange reform.
BoA predicts that the value of the naira will settle at around N680 to the dollar by the end of the year.
The bank believes that President Bola Ahmed Tinubu’s next focus should be on curbing oil theft, which has been a significant issue in the country.
BoA analysts note that the process of aligning rates and increasing the flow of USD into the formal market will take time. However, they anticipate that once this transition period is over, the value of the naira should strengthen and appreciate.
The bank further suggests that if successful in reducing oil theft, Nigeria’s crude oil production could increase from the current level of 1.2 million barrels per day (bpd) to 1.6 million bpd within 12 to 18 months. This increase in production would be a structural improvement for the country.
Nigeria heavily relies on hydrocarbons, which account for 90% of its exports, at least half of fiscal revenues, and approximately 6% of GDP. BoA believes that higher oil revenues, along with efforts to boost non-oil revenue, would help alleviate the country’s high debt service burden
