USD/NGN Outlook: Slightly weaker, but likely to move sideways as the rate is currently below its recent average and trading near recent lows, lacking a clear driver.
Key drivers:
• Rate gap: The Federal Reserve's plans for rate cuts contrast with the Central Bank of Nigeria's (CBN) focus on stabilizing the naira, affecting relative appeal.
• Risk/commodities: Oil prices are trading at recent highs, which may support the naira due to Nigeria's reliance on oil exports, but market volatility remains a concern.
• Economic growth: The CBN projects Nigeria's economy to grow by a promising rate in 2026, which could strengthen confidence in the naira and support its value.
Range: The USD/NGN rate is likely to drift within its established range without testing extremes in the near term.
What could change it:
• Upside risk: Better-than-expected U.S. economic data could lead to renewed strength in the dollar.
• Downside risk: A significant drop in oil prices could pressure the naira further, weakening it against the dollar.
