Deutsche Bank has brought Nigeria into its frontier currency monitor, a framework it uses to track thinner, harder-to-trade FX markets. In a Monday note, its strategists and economists said the naira screens "undervalued" and offers appealing carry - the interest you earn holding a currency - helped by favorable inflation-adjusted rates.
They also flagged the performance backdrop: the naira has climbed almost 8% against the dollar this year, putting it in the top 10 out of 144 currencies that Bloomberg follows. The advance has boosted returns across Nigerian markets, with equities and naira-denominated bonds placing near the top worldwide.
There is a catch. The bank wrote that "the principal risk to the outlook is from the fiscal side," pointing to this quarter's debt management office bond calendar, which it said indicates "elevated issuance levels." It also expects government outlays to increase ahead of January elections, though it sees "less risk from the elections themselves."
Spot check: the naira traded at 1,332 per dollar on Monday.
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The same Deutsche Bank monitor follows Angola's kwanza and Ghana's cedi. It said all three economies have held up well despite the conflict in the Middle East. Higher oil prices have bolstered the current accounts of Nigeria and Angola, while stronger gold prices have supported Ghana's.
Across these markets, the bank cited supportive conditions - notably high real rates and solid foreign reserve buffers - that have underpinned strong investor inflows.
In plain English: Deutsche Bank thinks carry and real yield support make naira assets interesting, as long as fiscal issuance and pre-election spending do not overwhelm the story. For investors already exposed to Nigeria, the currency's year-to-date strength has been a tailwind for stocks and local bonds, but the funding calendar is the one to watch next.
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