Naira could fall below ₦1,000/$ within a year, analysts says

The naira could strengthen beyond the psychologically important ₦1,000-to-a-dollar mark within the next 12 months, according to research by MDU Capital Limited, which estimates the currency's fair value at ₦984.70/$1.

The projection comes as the naira has recently shown renewed strength in the foreign exchange market. At the Nigerian Foreign Exchange Market, the currency closed at about ₦1,337/$ on August 28, extending a recent run of gains.

MDU Capital's latest research, titled “Nigerian Naira: Valuation Gap Points to a Potential Sub-N1,000/US$1 Path Over the Next 12 Months,” argues that the currency may currently be trading significantly above what underlying fundamentals suggest.

The firm's June 2026 MZM-based fair-value estimate puts the naira at ₦984.70/$, approximately 29 per cent below the ₦1,385/$ parallel-market rate used in its analysis. MDU Capital said a re-rating towards that fundamental value could take the dollar below ₦1,000 by mid-2027.

Three models point to a stronger naira

MDU Capital reached its valuation through three approaches: a money-supply model, a forward-rate model and a blended model.

The money-supply approach produced a fair value of roughly ₦987/$, while the forward-rate model placed it at approximately ₦1,043/$.

Its blended valuation, which assigns 90 per cent weight to the money-supply estimate and 10 per cent to the forward-rate calculation, produced the ₦984.70/$ fair value.

The firm said its money-supply methodology uses “the most liquid tranche of M2, proxied by broad monetary base,” with the estimated fair value weakening when money-supply growth outpaces the growth of external reserves.

Its forward-rate model, meanwhile, relies on “derived uncovered interest-rate parity,” incorporating the relationship between Nigerian and US interest rates and forward exchange rates.

The blended approach, it said, is “anchored to fundamentals with a market-pricing cross-check.”

Why MDU thinks the naira is undervalued

According to the investment research firm, the gap between the market exchange rate and its money-supply-based valuation has widened considerably since 2024.

“The MZM-implied rate has tracked spot closely in periods of pricing efficiency. The wide dispersion recorded since 2024 signals pricing above fundamental value.”

MDU Capital considers the money-supply measure “the most useful as a fair-value benchmark.”

In simple terms, the firm's argument is that the market may be assigning the dollar a higher naira price than underlying monetary and external-reserve conditions justify.

₦933/$ scenario for June 2027

MDU Capital's more bullish scenario goes beyond its ₦984.70 fair-value estimate.

Under its 12-month fair-value convergence scenario, the firm sees the naira reaching approximately ₦933/$ by June 2027.

Its analysis also presents less optimistic possibilities, including a base case around ₦1,229/$ and a trend-continuation scenario of roughly ₦1,027/$.

The distinction is important: MDU Capital describes the ₦933 projection as a “scenario-based house view; not a guaranteed forecast or investment recommendation.”

Recent market moves offer some support

The forecast comes as several indicators have recently become more favourable for the naira.

Nigeria's external reserves climbed to about $53.29 billion as of August 26, an 18-year high and roughly 29 per cent above the level recorded a year earlier, according to figures attributed to the Central Bank of Nigeria.

The naira has also strengthened steadily in recent weeks, moving from around ₦1,368/$ at the end of July to ₦1,350/$ by August 17 and then to roughly ₦1,337/$ by August 28 at the official market.

That momentum has helped narrow some of the pressure that followed the sharp depreciation of the currency since 2024.

What a sub-₦1,000 dollar would mean

A sustained move below ₦1,000/$ would represent a major turnaround for the naira and could reduce the local-currency cost of imported goods, foreign education, international travel, equipment and dollar-denominated business expenses.

It could also ease pressure on businesses whose operating costs are heavily exposed to foreign exchange.

But the journey from current levels to ₦933/$ would require considerably more than a temporary improvement in sentiment.

Dollar liquidity, inflation, interest-rate policy, foreign-exchange demand, crude oil earnings, capital inflows and the level of Nigeria's external reserves will all remain important.

For now, MDU Capital's message is that the naira has room to recover if the market-price gap closes and current fundamentals continue to support the currency.

The prospect of a sub-₦1,000/$ exchange rate is therefore no longer being presented merely as a distant possibility—but as a scenario that one Nigerian investment research firm believes could materialise within the next year.