The Nigerian Naira exhibited various response patterns amid the U.S dollar’s weakening in the global market.
The Naira has shown little to no improvement and even weakened in some sessions when the US dollar has weakened overall (i.e., declines in the dollar index caused by anticipated changes in Fed policy).
The naira’s official/spot rate has been around N1,409 to N1,421 per dollar.
As an example, the official market closed at N1,421.9/$ to end the week of January 24.
The Naira did not strengthen in the foreign exchange market despite a weaker US dollar, but rather declined in value even when compared to other emerging market currencies.
The primary reason has been Nigerian-specific amid relatively thin foreign exchange (FX) liquidity and supply constraints at the official window, low dollar inflows, a structurally reliant reliance on oil revenues, FX access restrictions, and a parallel (black) market rate.
The parallel market does not seem to show as much volatility as the official foreign exchange market.
Forecasts by different analysts and institutions show a prevailing consensus that the pressure on the Naira will persist. Irrespective of the prevailing strength of the USD, the Naira will not appreciate it
Most analysts predict that the Naira will mainly appreciate or remain within a specific range. The consensus is towards further strengthening the local currency. Some positive outlooks include the naira’s upside from the N1,450/$ support line to N1,350/$- N1,313/$ range by mid-2026 in some scenarios.
This is likely driven by the implementation and impacts of reforms, non-oil exports, and the rising headwinds of FX. The World Bank upgraded Nigeria’s growth forecast to 4.4% in 2026, a possible correction of the Naira’s undervaluation, and rising FX reserves.
Cautious outlooks
Cautious outlooks and bearish views include a decline to the range of ₦1/5-₦1,700. This includes Citi’s call for N1,650/$-N1,700/$ mid ‘26 due to oil price and CBN policy easing risks.
- Forecasts average the Naira tilts toward N1,400/$-N1,500/$ for the remainder of the year. Predictable and volatile factors include global (geopolitical) tensions, oil prices, and domestic policies.
- In theory, a weaker greenback would support the Naira due to inflationary pressures and would theoretically cause the commodity prices to increase (especially oil), the compounded risks present in Nigeria (FX supply, oil, inflation remaining high, and geopolitical/Oil) have limited the positive impacts.
- It is expected that the Naira will continue to decline in 2026, and fiscal reforms are needed to strengthen domestic cash inflows to the Naira. Continued CBN interventions, oil market activity, and global Fed actions for changes will continually influence the naira volatility in the FX market.
Dollar meltdown in the global FX market
The Federal Reserve’s (Fed) monetary policy week is off to a bad start for the US dollar (USD). The US Dollar Index (DXY), which compares the value of the US dollar to six major currencies, fell 0.4 percent to close at 97.
- According to market experts, countries are being forced to decrease their exposure to the US dollar and US assets due to the alienation of allies, which makes other safe-haven assets more appealing.
- The conflict between the US and several European Union (EU) countries over Greenland’s future last week has had a negative effect on Washington’s long-term relationships with its trading partners.
- AkademikerPension, a Danish pension company, announced that it is selling its $100 million US Treasury holdings.
Analysts claimed that the fund’s actions are a result of the US government’s dire financial situation during its debt crisis. The fund made it clear that the decision has nothing to do with the ongoing disagreements between the two economies.
