USD/NGN Outlook: The outlook for USD/NGN is slightly weaker, likely to move sideways due to its position below the recent average and lack of a clear driver.
Key drivers:
• Rate gap: The divergence between the Federal Reserve's possible easing policies and the Central Bank of Nigeria's focus on exchange rate stability is impacting the dynamics.
• Risk/commodities: The recent uptick in oil prices is supporting the Nigerian naira as oil revenues play a key role in Nigeria's economy.
• One macro factor: Nigeria's projected economic growth of 4.49% this year, combined with lowering inflation rates, suggests a cautiously positive environment for the naira.
Range: USD/NGN is expected to drift within its recent range, showing stability without significant volatility in either direction.
What could change it:
• Upside risk: An unexpected increase in U.S. economic data could strengthen the dollar, prompting upward pressure on the exchange rate.
• Downside risk: Continued improvement in Nigeria's fiscal outlook or a drop in oil prices could lead to a further depreciation of the dollar against the naira.
