Renaissance Capital Reports Naira Undervaluation by 30%

According to the latest Renaissance Capital Africa report, Nigeria’s prospects for 2024 appear promising, marked by a strengthening currency and an uptick in oil prices. The report highlights that as of March 28, with the Nigerian naira valued at N1,303/$, it remains significantly undervalued compared to its long-term average by approximately 30 percent.

The capital market is poised for a favorable start following February’s notable gains of 20 percent, as noted by the research firm. In its recent release titled “Thoughts from Renaissance Capital Africa,” the firm underscores that equity holders have already witnessed substantial gains since the end of February, coinciding with the naira’s appreciation from 1,600/$ to approximately 1,300/$. Additionally, Nigerian equities are currently perceived as some of the most attractively priced in the past two decades when measured in US dollar terms.

Emphasizing a shift toward sensible monetary policy, Renaissance Capital Africa suggests that portfolio investors can now navigate with increased confidence, anticipating a subsequent decline in inflation. Despite the recent adjustment of Nigeria’s 25-year average rate from 900/$ to 1,200/$, the report indicates that the currency’s current average rate stands at 912/$. At the prevailing exchange rate of 1,303/$ as of March 28, the naira remains markedly undervalued, presenting an advantageous investment opportunity, particularly when compared to US treasuries.