Goldman Retains 1,250 Naira Forecast as Oil and High Yields Support Bullish View

Goldman Sachs expects the US dollar to fall to 1,250 against the Nigerian naira over 12 months, bringing forward part of its expected naira appreciation. The bank lowered its three-month forecast to 1,300 from 1,325 and its six-month projection to 1,275 from 1,300, while retaining the 1,250 forecast.

Goldman put the USD/NGN pair near 1,325 on 17 September. That makes its 12-month projection roughly 5.7% below that reference level.

Oil and currency tailwinds

Oil earnings and interest income support the naira. Expensive oil puts pressure on importing currencies such as the Indian Rupee, but it supports Nigeria’s export revenues. Goldman expects Middle East shipping disruption to persist into 2027, keeping oil prices elevated.

“Given the tailwind from higher oil prices on top of an already strong balance-of-payments backdrop and FX reserve outlook, we see risks as increasingly skewed towards more currency appreciation.”

Goldman’s valuation model still judges the naira deeply undervalued. That leaves more scope for exchange-rate gains than in Kazakhstan’s Tenge following that currency’s stronger rally.

Carry trade and open market yields

Investors also earn interest while holding Nigerian assets, the return known as carry. Goldman estimates average yields around 20% on open-market-operation securities with maturities exceeding 14 days. That implies expected inflation-adjusted yields above 5%, near the highest since 2015.

Reserve policy and the pace of gains

Reserve policy could determine the pace. Goldman believes the central bank’s accumulation of foreign reserves has limited the naira’s appreciation. “Further, we had argued that the central bank was likely leaning against currency appreciation by remaining in reserve-accumulation mode, a policy choice that is proving increasingly costly.”

Buying foreign currency can restrain naira strength. Absorbing the domestic liquidity created by those purchases carries a cost when interest rates are high. That policy choice is a constraint on how quickly Goldman’s targets can be reached.

The bank explicitly allows for policymakers’ preference for gradual appreciation. Its undervaluation argument does not imply an immediate move to 1,250.

What it means for the naira

For the naira, Goldman’s call points to scope for more appreciation over 12 months if oil prices remain high and carry stays attractive. The central bank’s reserve accumulation and preference for gradual appreciation could slow the pace. For Nigerian businesses and consumers, the signal is that Goldman sees more naira strength over the next year, not an immediate move to 1,250.