The recent forecasts for the EUR to NGN exchange rate reflect a combination of geopolitical developments, Central Bank monetary policies, and market sentiment. Analysts suggest that the euro has experienced upward support due to renewed hopes for a breakthrough in the Ukraine-Russia peace process, which, despite setbacks in German business sentiment, is providing some buoyancy to the currency.
The European Central Bank (ECB) is noted to be transitioning to a dovish stance after previously raising interest rates to combat inflation, with expectations of possible rate cuts down to 3.5% by late 2025. This divergence in interest rate paths, particularly in relation to the U.S. Federal Reserve, could weigh on the euro's appeal as it may reduce the interest rate differential that makes euro-denominated assets less attractive to investors.
In addition, the approval of Bulgaria’s accession to the eurozone is anticipated to have a positive long-term effect on the euro's circulation and value. Despite a notable appreciation against the USD earlier this year—strengthening nearly 14%—analysts warn that prolonged subdued financial conditions may force the EUR/USD exchange rate closer to 1.10, impacting the EUR's value against the naira as well.
On the Nigerian side, the Central Bank has recently cut rates for the first time since 2020, aiming to stimulate growth amid easing inflation. Nevertheless, the suspension of domestic petrol sales by Dangote Refinery, along with increased inflation and subsidy reforms, poses significant challenges for the naira. The IMF has highlighted improvements in Nigeria’s macroeconomic stability through recent reforms, but uncertainty remains due to continued pressure from inflation.
Currently, the EUR to NGN is trading at 1,676, approximately 2.6% below its three-month average of 1,720. The exchange rate has seen a volatile range, fluctuating between 1,656 and 1,798. Such volatility can be further impacted by oil price movements, with recent oil prices sitting at $63.37—3.0% below the three-month average of $65.3—potentially affecting Nigeria's economy which is heavily reliant on oil exports.
Overall, while the euro might benefit from geo-political developments in Europe, the outlook for the naira remains challenging amid domestic economic reforms and external pressures. Currency and market participants should closely monitor these evolving factors as they could significantly influence the EUR to NGN exchange rate in the coming months.
