Deutsche Bank has added Nigeria to its frontier foreign exchange watchlist, describing the naira as undervalued and suggesting that the currency could strengthen further against the US dollar....
Deutsche Bank has added Nigeria to its frontier foreign exchange watchlist, describing the naira as undervalued and suggesting that the currency could strengthen further against the US dollar.
In a client note released on Monday, the German lender attributed the naira’s positive momentum to attractive interest-rate returns and favourable real interest rates, which continue to support foreign investment inflows.
The naira has appreciated by nearly eight per cent against the dollar in 2026, ranking among the 10 best-performing currencies out of 144 tracked globally by Bloomberg, according to the report.
The currency’s performance has also boosted returns for foreign investors holding Nigerian equities and naira-denominated bonds, placing the assets among the strongest-performing investments globally.
Deutsche Bank’s frontier foreign exchange monitor also tracks Angola’s kwanza and Ghana’s cedi, noting that the three African economies have demonstrated resilience despite economic pressures linked to conflict in the Middle East.
The bank said higher global crude oil prices had supported the current account positions of Nigeria and Angola, while rising gold prices had strengthened Ghana’s trade position.
It added that high real interest rates and relatively comfortable foreign exchange reserves had helped attract foreign portfolio investments into the three markets.
Despite its positive outlook for the naira, Deutsche Bank warned that rising government borrowing could undermine the currency’s performance.
“The principal risk to the outlook is from the fiscal side,” the bank said in the note.
It pointed to the Debt Management Office’s fourth-quarter bond issuance calendar as an indication of elevated borrowing requirements.
The lender also expects government spending to increase ahead of Nigeria’s forthcoming January elections, although it considers the election itself a smaller risk to the naira than the broader expansion in fiscal expenditure.
The assessment suggests that the currency’s continued strength will depend not only on foreign exchange inflows and attractive domestic interest rates but also on the government’s borrowing and spending decisions.
For Nigeria, sustained naira appreciation could help moderate the cost of imported goods and ease some inflationary pressures.
However, the currency’s outlook remains sensitive to fiscal policy, movements in global oil prices and the sustainability of foreign portfolio inflows.