Nume Ekeghe
The naira could strengthen to below N1,000/$ within the next 12 months, with analysts at MDU Capital Limited putting the currency’s fair value at N984.7/$, according to its latest research.
The firm in its recent research note titled, “Nigerian Naira: Valuation Gap Points to a Potential Sub-N1,000/$1 Path Over the Next 12 Months,” said its valuation pointed to a significant gap between the naira’s market rate and its estimated fundamental value.
MDU Experts stated: “MZM fair-value estimate for the naira is N984.7/$1 (Jun-2026)”, adding that this was “already below N1,000 and -29 per cent below the N1,385 parallel market rate.”
It added, “A re-rating toward this trend would place $/NGN below N1,000 by mid-2027.”
The research house arrived at its valuation using three measures of fair value: the money-supply model, forward-rate model and its own blended valuation model.
Under the money-supply approach, MDU Capital estimated the naira’s fair value at about N987/$, while its forward-rate estimate stood at approximately N1,043/$.
Its blended model, which gives a 90 per cent weight to the money-supply valuation and 10 per cent to the forward-rate estimate, produced a fair value of N984.7/$.
Explaining its methodology, the firm said the money-supply model uses, “The most liquid tranche of M2, proxied by broad monetary base,” while its fair-value estimate “depreciates as M2 growth outpaces external reserves growth.”
For the forward-rate model, MDU Capital said the valuation was based on the “derived uncovered interest-rate parity”, reflecting the relationship between Nigerian and US interest rates and the forward exchange rate.
On its blended model, the firm said it was “anchored to fundamentals with a market-pricing cross-check.”
MDU Capital also argued that the naira’s recent pricing in the foreign exchange market remained above its fundamental valuation.
It stated: “The MZM-implied rate has tracked spot closely in periods of pricing efficiency. The wide dispersion recorded since 2024 signals pricing above fundamental value.” The firm noted that the money-supply measure was “the most useful as a fair-value benchmark.”
Looking ahead, MDU Capital’s 12-month scenario projects further appreciation of the naira if the valuation gap gradually closes.
The research house’s “12-Month Outlook: Fair-Value Convergence Scenario” puts the naira at N933/$ by June 2027, compared with its June 2026 spot rate of about N1,229/$ in the scenario analysis.
It described the projection as a, “scenario-based house view; not a guaranteed forecast or investment recommendation.”
The research also showed alternative paths for the currency, including a base case around N1,229/$, a trend-continuation scenario around N1,027/$, and the MDU convergence scenario of N933/$.
MDU Capital said the convergence scenario assumes that the prevailing 12-month forward trend leaves spot-model gap little changed.