The outlook for Nigeria’s local currency has brightened as financial analysts project that the naira will close the year trading between ₦1,400 and ₦1,450 per dollar, buoyed by declining inflation and improved foreign exchange reserves.
According to a macroeconomic report released by CardinalStone Research, titled “Moderating Inflation Bodes Well for Nigeria’s Currency Valuation,” the expected slowdown in inflation will support the stability of the naira forecast in the coming months.
The firm noted that a combination of favorable macroeconomic trends and monetary policy adjustments could strengthen Nigeria’s exchange rate trajectory through the final quarter of 2025.
Naira Forecast Linked to Easing Inflation and FX Stability
Nigeria’s inflation rate, which had surged for three years, has now shown consistent signs of moderation.
The National Bureau of Statistics (NBS) recently reported that headline inflation dropped to 18.02% in September, down from 20.12% in August 2025 — marking the sixth consecutive month of deceleration and the first time since 2022 that inflation has fallen below 20%.
Analysts attributed this trend to base effects, improved agricultural yields, and seasonal harvest supplies that have helped reduce food costs across several states.
CardinalStone Research observed that this inflation moderation directly supports their naira forecast, as slower price growth tends to strengthen the purchasing power of the domestic currency and encourage investor confidence.
“The ongoing disinflationary trend bodes well for currency valuation. Alongside a sustained current account surplus and rising foreign reserves, we expect the naira to close the year within the ₦1,400–₦1,450 range,” the report stated.
The analysts further predicted that the Central Bank of Nigeria (CBN) could reduce the Monetary Policy Rate (MPR) by 100 basis points to 26% at its upcoming meeting in November — a move that may encourage lower interest rates and stimulate borrowing.
Market Analysts Back Stable Naira Outlook
Analysts at United Capital Research expressed similar optimism, forecasting that inflation may end the year “slightly above” the government’s 15% target.
Their report estimated an average inflation rate of 16.07% for the fourth quarter of 2025, assuming no major external shocks affect consumer prices.
United Capital added that a more stable inflation environment and gradual policy easing could guide the MPC toward another rate cut during its next meeting scheduled for November 24–25, 2025.
This expectation aligns with CardinalStone’s naira forecast, which hinges on improved policy coordination and liquidity management by the apex bank.
Meanwhile, Coronation Asset Management highlighted that the slowdown in inflation underscores Nigeria’s “two-speed economy.”
According to the firm, while food prices have declined due to better supply conditions, core inflation—which measures non-food price changes—remains stubbornly high due to elevated service costs and logistics expenses.
“The MPC is likely to adopt a cautious, data-driven easing approach in November to balance macroeconomic stability with the ongoing economic recovery,” Coronation said.
Naira Faces Temporary Pressure in FX Market
Despite the upbeat naira forecast, the local currency experienced short-term volatility in the foreign exchange market last week.
It closed at ₦1,475.35 per dollar, a 1.38% decline from the previous week’s ₦1,455.17 per dollar.
Market analysts attributed the weakness to increased demand for dollars from importers and businesses ahead of the festive season.
At the parallel market, the naira also slipped by 0.61% to ₦1,484 per dollar, according to data from Cowry Assets Management Limited, reflecting lingering foreign exchange demand pressures.
However, Nigeria’s external reserves rose to $42.68 billion as of Thursday, driven by higher oil revenues, improved non-oil inflows, and a sustained trade surplus.
The growth in reserves has been instrumental in cushioning FX volatility and restoring some market confidence.
Policy Reforms and Naira Forecast for 2026
Economic experts believe that maintaining the momentum of reform is key to achieving currency stability.
Since the beginning of 2025, the CBN has implemented several measures aimed at improving FX liquidity, including clearing a portion of outstanding forward obligations and harmonising multiple exchange windows.
CardinalStone Research stressed that continued progress on these reforms could position Nigeria for a stronger naira performance in 2026.
“With inflation on a sustained downward path and reserves building steadily, the exchange rate outlook appears more balanced than in previous years,” the analysts added.
Nonetheless, they cautioned that external shocks—such as global oil price volatility or renewed geopolitical tensions—could influence the naira forecast in the coming quarters.
Investor Confidence and Market Sentiment
Market watchers say that investor confidence in the naira is gradually returning, particularly among portfolio investors who had previously exited the Nigerian market due to FX uncertainty.
The potential for lower interest rates and improving macroeconomic stability may also attract new capital inflows into fixed-income and equities markets.
Financial experts argue that if the CBN maintains policy consistency and continues to rebuild reserves, the naira forecast of ₦1,400–₦1,450 per dollar by December 2025 could prove attainable.
With inflation trending downward and the CBN signaling a more accommodative stance, the outlook for Nigeria’s currency has improved significantly.
While short-term pressures persist in the FX market, analysts agree that structural reforms, fiscal discipline, and stable oil earnings could anchor the naira within the projected range.
For now, the naira forecast of ₦1,400–₦1,450 per dollar remains credible — but only if current economic gains are sustained and the government resists the temptation to reverse key policy reforms.
