Standard Bank has adjusted its medium-term outlook on the Nigerian naira, projecting a 3.1% depreciation against the US dollar in 2025, but at a stronger level than previously forecast.
In its latest projection, seen by Nairametrics on Wednesday, the bank expects the naira to close 2025 at N1,585.5/$1, compared to its earlier forecast of N1,697.5/$1. The revision follows new market evidence and developments in recent months that point to a more stable trajectory for the currency.
In the assessment, the bank noted that recent developments in Nigeria’s foreign exchange market and macroeconomic environment had prompted an adjustment of its earlier projections.
“Based on some new evidence and how activities have panned out in the past month, we now amend our medium-term views on the USD/NGN pair. Specifically, we now expect the NGN to depreciate by a modest 3.1% against the USD in 2025, likely ending this year at 1,585.5 (previous forecast: 1,697.5) and settling at NGN1,692.6 by December 2026, and with a higher possibility of the currency ranging stronger, rather than lower, over the forecast horizon,” the document stated.
2027 campaigns could exert pressure on the Naira
In the report, the bank stated that political developments and fiscal spending ahead of the 2027 general elections could exert pressure on the naira.
According to the bank, “Electioneering activities are key factors stakeholders should consider as a likely driver of the USD/NGN pair in 2026 and 2027. Primary election activities are expected to begin in Q1:26, with campaigns for the 2027 general election expected to be in full swing from Q3:26. These activities are likely to lead to an increase in dollar demand, which, in addition to increased fiscal spending, should support an increase in money supply.”
The Bank projected that the Central Bank of Nigeria’s (CBN) stronger FX reserve position should allow the apex bank to mitigate USD/NGN upside pressure.
Decline in oil and gas exports in Q4 2024 driven by domestic sales
According to the report, the recent decline in oil export is largely driven by domestic crude sales.
The Bank said this development “lowers the amount of crude oil available for exports. Indeed, after outstripping gas sales, crude oil exports declined to a q/q average of USD8.62bn in Q2:24 – Q4:24 when the Dangote Refinery started operations, from USD10.99bn in Q1:24.”
The report stated further “the reduction in petroleum imports due to Dangote Refinery-induced local refining ensured that oil imports declined for a third consecutive quarter, to a 17-quarter low of USD2.68bn. However, a 24.1% q/q increase in non-oil imports (73.3% of total imports as of Q4:24) saw total imports increasing by 9.3% q/q, to USD10.05bn in Q4:24.”
What you should know
In December 2024, President Bola Tinubu, during his budget presentation speech said the 2025 budget was based on the projections that inflation will decline from the current rate of 34.6 per cent to 15 per cent, while the exchange rate will improve from approximately 1,700 naira per US dollar to 1,500 naira.
Several experts expressed doubts about President Tinubu achieving the targets.
