USD/NGN Outlook:
The USD/NGN exchange rate is likely to decrease, trading significantly below its recent average and near recent lows. This is primarily driven by the Central Bank of Nigeria's focus on exchange rate stability.
Key drivers:
• Rate gap: The Federal Reserve's current monetary policy contrasts with the Central Bank of Nigeria's aim for stability, which may widen the rate gap against the dollar.
• Risk/commodities: Oil prices are above their average, supporting the naira due to Nigeria's reliance on oil exports but still presenting volatility that can pressure the currency.
• One macro factor: Increased foreign investments are expected to positively influence the naira's value as projected by the Manufacturers Association of Nigeria.
Range:
Expect the USD/NGN to drift within its recent range, reflecting current volatility without clear directional guidance.
What could change it:
• Upside risk: A surprise increase in US interest rates could strengthen the dollar against the naira.
• Downside risk: A drop in global oil prices could undermine the naira's recent gains.
