Naira Undervalued by 29%, Could Trade Below N1,000 by Mid-2027 — Report

By Alex Igbekhe

The naira could strengthen to below N1,000 per dollar by the middle of 2027, as investment research firm MDU Capital Limited has identified a significant valuation gap between the currency’s current market price and its estimated fundamental value.

In its research note, the firm estimated the naira’s fair value at N984.7 per dollar as of June 2026, representing a 29 percent discount to the parallel market rate of N1,385 per dollar used in the report.

“A re-rating toward this trend would place $/NGN below N1,000 by mid-2027,” the analysts stated.

The research house arrived at its valuation using three distinct measures. Under the money-supply approach, the naira’s fair value stood at approximately N987 per dollar. The forward-rate estimate put the figure at roughly N1,043 per dollar. The blended model, giving 90 percent weight to the money-supply valuation and 10 percent to the forward-rate estimate, produced the final fair value of N984.7 per dollar.

Explaining the methodology, the firm noted that the money-supply model uses the most liquid tranche of M2, proxied by broad monetary base. The forward-rate model, on the other hand, was based on derived uncovered interest-rate parity, reflecting the relationship between Nigerian and US interest rates.

MDU Capital argued that the naira’s recent pricing in the foreign exchange market had remained above its fundamental valuation. The wide dispersion recorded since 2024 signals pricing above fundamental value, the firm stated, describing the money-supply measure as the most useful fair-value benchmark.

Looking ahead, the firm’s 12-month convergence scenario projects the naira at N933 per dollar by June 2027, compared with the June 2026 spot rate of approximately N1,229 per dollar in the scenario analysis. Alternative paths presented in the report included a base case around N1,229 per dollar and a trend-continuation scenario around N1,027 per dollar.

MDU Capital emphasised that the projection is a scenario-based house view and not a guaranteed forecast or investment recommendation, adding that the assumptions underlying the 12-month scenario may not hold.