Deutsche Bank has added Nigeria to its Frontier FX watchlist, betting that the naira is undervalued and could strengthen further against the dollar.
The German lender said the naira offers attractive carry-trade opportunities, where investors borrow in low-yielding currencies to invest in higher-yielding ones.
Data compiled from official figures shows the naira appreciated 0.45% in September, firming to 1,329.50 per dollar at month-end from 1,335.50 at the end of August, a gain of 6 naira. The move extended a relatively resilient performance for the currency in 2026.
The appreciation has boosted returns on naira assets. Nigerian equities and local-currency bonds have been among the best performers globally this year on a dollar-adjusted basis.
Strategists and economists at the Frankfurt-based bank see the currency as undervalued, supported by high real interest rates and improved external balances.
“The principal risk to the outlook is from the fiscal side,” the bank said on Monday, citing the Debt Management Office’s bond issuance calendar for the fourth quarter, which signals elevated supply.
The bank expects fiscal spending to increase ahead of Nigeria’s general elections scheduled for January, but sees “less risk from the elections themselves.”
Deutsche Bank’s Frontier FX monitor also tracks Angola’s kwanza and Ghana’s cedi. It said the three economies have performed well this year despite fallout from the conflict in the Middle East.
Higher crude prices have supported Nigeria and Angola, while firmer gold prices have benefited Ghana. The bank said the commodity moves have strengthened current-account positions, while high real rates and substantial FX reserves have helped attract inflows.
For Nigeria, those factors have improved dollar availability and made local-currency assets more attractive to foreign portfolio investors.
The watchlist inclusion comes weeks after index provider FTSE Russell reclassified Nigeria from Unclassified to Frontier Market status, effective Sept. 21, 2026.
Nigeria was removed from FTSE’s Frontier indices in September 2023 after foreign investors faced persistent difficulties repatriating capital and executing FX transactions.
FTSE has since acknowledged improvements in the FX market and the clearance of FX backlogs before approving Nigeria’s return. The move could increase Nigeria’s visibility among benchmark-driven investors.
Analysts see the naira trading in a range of 1,290 to 1,370 per dollar through October.
The Central Bank of Nigeria’s Monetary Policy Committee cut the monetary policy rate to 23% at its last meeting. The easing, combined with seasonal fourth-quarter import demand, could limit further gains.
Still, the interest-rate differential between Nigeria and the United States, disinflation with headline inflation approaching 14%, and higher domestic petroleum refining continue to support real returns.
Sustained appreciation will depend on FX liquidity, fiscal discipline and continued investor confidence, the bank said.