EUR/NGN Outlook:
The EUR/NGN rate is likely to decrease as it is currently near a 90-day low and significantly below its 3-month average. Pressure from rising inflation forecasts in Nigeria and a lack of supportive economic data for the Eurozone are contributing to a bearish outlook.
Key drivers:
• Rate gap: The European Central Bank is maintaining a loose monetary policy, while the Central Bank of Nigeria is focusing on exchange rate stability, creating a widening gap in interest rate expectations.
• Risk/commodities: Oil prices have been volatile and are currently above their average, which could support the Naira’s strength by potentially increasing Nigeria's revenue from exports.
• One macro factor: Recent projections indicate Nigeria's inflation could spike to a high level, which may weaken the Naira's purchasing power and put further pressure on the currency.
Range:
EUR/NGN is likely to hold near current levels but may test lower extremes within its recent range.
What could change it:
• An upside risk could arise if the Eurozone reports improved industrial production figures, boosting the Euro's appeal.
• Downside risk could stem from further spikes in Nigeria's inflation, which could harm investor confidence in the Naira.
