Deutsche Bank has adopted a more positive outlook on the Nigerian naira, adding the currency to its frontier foreign exchange watchlist as the bank sees potential for further gains against the US dollar.
In a client note published on Monday, October 19, 2026, strategists at the German bank described the naira as undervalued and pointed to attractive currency investment returns and positive real interest rates as factors supporting the currency.
The assessment comes after the naira recorded an appreciation of nearly 8% against the dollar in 2026, placing it among the 10 best-performing currencies out of 144 tracked by Bloomberg, according to a report on the bank’s outlook.
Why Deutsche Bank Is Bullish on the Naira
Deutsche Bank’s positive view is linked to the potential returns available to investors holding naira-denominated assets and the currency’s valuation.
The bank highlighted two important factors: attractive carry opportunities and favourable real interest rates.
Carry refers to the returns investors may earn by holding assets in a currency with relatively high interest rates. When investors borrow in a lower-yielding currency and invest in higher-yielding assets, they may earn additional returns, although exchange-rate movements can reduce or eliminate those gains.
Real interest rates, meanwhile, measure interest rates after accounting for inflation. Positive real rates can make a country’s assets more attractive to investors seeking returns above the rate at which prices are rising.
These factors can support demand for the naira when foreign investors are willing and able to access Nigeria’s financial markets and convert their funds into local currency.
However, high interest rates alone do not guarantee currency appreciation. Investors also consider exchange-rate risks, the ability to move funds in and out of the country, inflation, government finances and the availability of foreign exchange.
Naira Has Appreciated Nearly 8% Against the Dollar in 2026
The naira’s performance this year is one of the factors behind the more positive outlook.
According to the report on Deutsche Bank’s assessment, the currency had appreciated by nearly 8% against the US dollar in 2026, ranking it among the 10 strongest-performing currencies in Bloomberg’s group of 144 tracked currencies.
The naira was quoted at around ₦1,332 per dollar on Monday, October 19, according to the same report. This figure represents the rate cited in that report, not a guarantee of the rate available to every customer or in every foreign-exchange market.
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A stronger naira can reduce the local-currency cost of imported goods and dollar-denominated obligations, provided the improvement is sustained and reflected in the relevant market.
It can also help businesses that depend on imported raw materials, machinery or other foreign inputs manage their costs.
For Nigerians who need dollars for school fees, travel, medical expenses or international payments, a sustained appreciation could make those expenses cheaper in naira terms.
However, the benefit depends on the actual exchange rate available to each customer and whether importers and businesses pass lower costs on to consumers.
Higher Government Borrowing Remains a Risk
Despite its positive outlook, Deutsche Bank has identified risks that could put pressure on the naira.
One concern is the government’s borrowing programme. The bank pointed to the Debt Management Office’s issuance calendar for the current quarter, which indicates a high level of debt issuance.
Heavy government borrowing can affect currency markets through several channels, including changes in domestic interest rates, investor demand for government securities and the amount of money available to finance public spending.
The bank also expects government spending to increase ahead of Nigeria’s January elections, adding another fiscal consideration to the currency outlook.
If fiscal pressures increase or investor confidence weakens, the naira could face renewed pressure even if interest rates remain attractive.
This is why Deutsche Bank’s positive outlook should not be interpreted as a prediction that the currency will strengthen every day or move in only one direction.
What the Outlook Means for Nigerian Businesses and Consumers
The outlook matters because movements in the naira affect more than foreign-exchange traders.
Businesses that import goods, pay overseas suppliers or service dollar-denominated loans are particularly sensitive to exchange-rate changes.
If the naira strengthens and remains stable, these businesses may spend less in local currency to meet some foreign obligations. That could ease operating costs and, in certain cases, reduce pressure to increase prices.
Consumers could also benefit if lower import costs eventually translate into lower prices for imported products.
However, these effects are not automatic. Businesses may continue to face high transport costs, energy expenses, financing costs and other domestic operating challenges.
Exporters and companies that earn a significant share of their revenue in dollars may also receive fewer naira when converting the same dollar earnings if the local currency appreciates.
For individuals and businesses planning dollar payments, the practical lesson is to base budgets on available exchange rates and allow for possible fluctuations rather than assuming the naira will continue to strengthen.
Does Deutsche Bank’s Watchlist Mean the Naira Will Keep Rising?
No. Being included on a currency watchlist reflects the bank’s assessment and interest in the currency; it is not a guarantee of future performance.
The naira’s direction will depend on several factors, including foreign-exchange supply and demand, inflation, interest rates, foreign investment flows, oil-related receipts and government finances.
The ability of foreign investors to enter and exit the Nigerian market efficiently will also matter. Attractive returns may draw interest, but investors still need confidence that they can manage currency risks and access liquidity when necessary.
Deutsche Bank’s assessment is therefore a positive signal about how the bank views the naira’s valuation and potential returns, but the currency’s actual performance will depend on economic and market conditions.
What to Watch Next
Investors and businesses will be watching the naira’s performance in the official foreign-exchange market, foreign-exchange inflows, the government’s borrowing activity and any changes in inflation and monetary policy.
The ability of Nigeria to sustain foreign-exchange supply while managing fiscal pressures will be important in determining whether the recent gains can continue.
For now, Deutsche Bank’s outlook puts the naira on a more positive footing in the eyes of the bank’s currency strategists. It does not remove the risks facing the currency, but it suggests that the bank sees potential value in Nigeria’s foreign-exchange market.
The key question is whether the factors supporting the naira can remain strong enough to withstand fiscal pressures and changing investor sentiment.