USD/NGN Outlook:
Slightly weaker, but likely to move sideways as the rate trades significantly below its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The U.S. Federal Reserve has maintained interest rates, while Nigeria’s Central Bank keeps its rates high to manage inflation, creating a notable differential.
• Risk/commodities: Oil prices are currently high, which usually supports the naira; however, recent volatility could cause uncertainty.
• One macro factor: The steady increase in Nigeria's foreign reserves, boosted by diaspora remittances, is improving stability for the naira amidst challenging external conditions.
Range:
The USD/NGN is likely to hold in its recent range, potentially drifting towards the extremes as market conditions fluctuate.
What could change it:
• Upside risk: An unexpected increase in oil prices could boost the naira.
• Downside risk: Further geopolitical tensions affecting the USD may weaken the naira significantly.
