Standard Bank has projected that the Naira will close at N1,458.8/$1 by December 2025, and slightly weaker at N1,473.0 by December 2026, amid improved foreign exchange (FX) reserves, buoyant banking system liquidity, and growing investor confidence in naira assets.
In its latest projection, seen by Nairametrics on Saturday, the bank noted that despite persistent risks, the Naira’s performance since mid-September has defied earlier expectations.
According to the report, the currency has appreciated against the US dollar to below N1,500 since September 15, reflecting the Central Bank of Nigeria’s (CBN) sustained efforts to stabilize the market.
“While the risks remain evident, we now again lower our year-end FX forecasts. We see the NGN at 1,458.8 against the USD by this year-end and 1,473.0 by December 2026,” the bank stated.
Robust banking liquidity supports market stability
The report highlighted that Nigeria’s financial system liquidity has been consistently above N1 trillion daily since August 26, averaging N2.8 trillion and reaching N6.38 trillion as of October 7, 2025.
- This sustained liquidity, it noted, was buoyed by recent Open Market Operations (OMO) maturities worth N1.64 trillion and a net Cash Reserve Ratio (CRR) refund of N1.3 trillion to banks following the CBN’s decision to lower the CRR to 45 percent during its September Monetary Policy Committee (MPC) meeting.
- While OMO yields have moderated, they remain relatively elevated, reflecting the CBN’s balance between easing inflationary pressures and sustaining investor appetite.
- The MPC’s recent rate cut — with expectations of a deeper cut in November — has also contributed to improved liquidity across the financial system.
Also, Standard Bank observed a disconnect between excess liquidity and exchange rate depreciation, which has traditionally weakened the naira. The difference, it explained, is that much of the current liquidity is held by corporates and private investors, who are less likely to demand FX amid growing confidence in naira-denominated assets.
CBN’s measures strengthening FX position
The bank credited the CBN with proactive steps to manage liquidity and enhance FX reserves.
According to the report, public sector deposits, typically responsible for exchange rate volatility after FAAC distributions, have been effectively restrained through the 75 percent CRR on non-TSA public sector deposits.
Furthermore, the CBN has reportedly secured the rollover of bilateral transactions worth between $3.0 and $3.5 billion due this quarter, easing near-term pressure on reserves. In addition, International Oil Companies (IOCs) sold $1.6 billion to the CBN in the first nine months of 2025, excluding the $100 million monthly sales to the open market.
- The Nigerian National Petroleum Company Limited (NNPCL) increased its dollar remittances to the Federation Account from $290 million in May to $605.63 million in September 2025, driving FX reserves up to $42.54 billion as of October 6.
- Standard Bank projected that NNPCL inflows could grow to $1 billion monthly once the government completes the repayment of past fuel subsidy arrears.
“This should continue to support gross FX reserves, thereby increasing the CBN’s ability to support the currency and ensure orderly exits whenever foreign investors exit the market,” the bank stated.
What you should know
In its earlier projection in September, the bank stated it expects the naira to close 2025 at N1,585.5/$1, compared to its earlier forecast of N1,697.5/$1.
- In the report, the bank stated that political developments and fiscal spending ahead of the 2027 general elections could exert pressure on the naira.
- 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.
Nairametrics reports that the Naira closed the week stronger, appreciating to N1,458/$1 on Friday.
