Will naira sustain rebound?

Goldman Sachs has projected that the naira will continue to make gains after emerging as the best performing currency globally this month. The group anticipates that the local currency could trade at around 1,000 naira to the U.S. dollar or even lower, contingent on the Central Bank of Nigeria's sustained effective policy management. Emmanuel Odiaka, CEO of ECOB Capital, provided insights into the currency outlook and the apex bank's overall strategy during an interview on CNBC Africa. Amidst discussions on inflation, naira’s valuation, market interventions, and monetary policy, Odiaka shed light on various facets impacting Nigeria's economic landscape. The recent deflation numbers, though slightly higher than market projections, are expected to exhibit some deceleration from the upcoming month, considering the gains of the naira. Analyzing Goldman Sachs' naira projections, Odiaka highlighted the speculative nature of previous valuations and expressed confidence in the current market assessments, asserting that the true value of the naira is now being reflected. He also referenced similar forecasts from entities like Citigroup, JP Morgan Stanley, and Renaissance, commending the reforms undertaken by the Central Bank of Nigeria (CBN) so far. The discussion shifted to the sustainability of the CBN's strategy and the importance of building reserves. Odiaka emphasized the significance of stabilizing the currency before focusing on reserve accumulation, accentuating the need to shore up market liquidity amidst successful clearing of backlogs and foreign investor attraction. Reflecting on the local debt markets' performance in the first quarter and the ongoing second quarter, Odiaka highlighted bullish trends in treasury bills and observed easing discount rates. Despite negative real returns on inflation, market appetite for bond assets remained strong. Addressing future monetary policy, Odiaka indicated that the CBN's commitment to price stability through an unprecedented 600 basis points hike was aimed at currency stabilization. Looking ahead, he opined that the apex bank's likely stance would be cautious, considering the need for a follow-through while monitoring inflation dynamics closely. On the subject of inflation figures hitting 33.3 percent, Odiaka anticipated a measured response from the CBN to avoid stifling the real sector and exacerbating borrowing costs. He predicted a hold at the forthcoming meeting, foreseeing a balanced approach to navigate the economic challenges. Odiaka's insights underscored the delicate balance required in managing Nigeria's macroeconomic landscape, emphasizing the importance of strategic policymaking to support currency stability and sustainable growth.