Deutsche Bank adds Nigeria to frontier FX monitor, sees naira undervalued
Deutsche Bank has added Nigeria to its frontier foreign exchange monitor, signalling growing investor interest in the naira amid expectations of further strengthening against the dollar. The naira appreciated 0.45% in September, moving from N1,335.50/$ at end-August to N1,329.50/$ at end-September, and closed the month N6 stronger. The bank views the naira as undervalued, attractive for carry‑trade investors due to favourable interest‑rate differentials and real yields. This optimism follows FTSE Russell’s reclassification of Nigeria to Frontier Market status effective September 21, 2026, after clearing FX backlogs. Supporting factors include higher crude oil prices boosting external positions, solid foreign exchange reserves, and relatively high real interest rates. However, Deutsche Bank warns fiscal pressures—especially elevated bond issuance ahead of January elections—pose the principal risk to the naira’s outlook. Nairametrics projects the USD/NGN rate will trade between N1,290 and N1,370 through October, though monetary policy easing and seasonal import demand could cap further gains. For investors, the combination of index inclusion, currency strength, and commodity‑supported fundamentals improves Nigeria’s FX market perception, but sustained inflows depend on liquidity, fiscal discipline, and maintaining confidence. Will you consider naira‑denominated assets for their yield advantage, or wait for clearer fiscal signals before committing capital?