Recent forecasts for the USD to NGN exchange rate reflect a backdrop of weakening USD driven by expectations of aggressive interest rate cuts by the Federal Reserve in 2026. Analysts note that a recent drop in US inflation to 2.7% has increased market bets on a dovish Fed, leading to a broad decline in the USD. As a result, the US Dollar Index has retraced from its recent highs, exhibiting a softer outlook that is likely to continue unless supported by stronger economic indicators.
In the current context, the Nigerian naira (NGN) has shown relative stability, with the exchange rate hovering around 1460 NGN per USD, just above its three-month average. This range stability, which spans from 1435 to 1492 NGN, indicates some positive momentum for the naira amidst an environment characterized by improved macroeconomic conditions and reforms highlighted in the IMF's recent Article IV Consultation. Furthermore, a declining inflation rate in Nigeria has bolstered foreign exchange market confidence, with the rate reported at 18.02% as of September 2025.
While medium-term projections suggest a potential depreciation of around 6% for the NGN amid global market volatility, recent performance indicates that tighter monetary policies and a stable naira have contributed to its resilience. The correlation between oil prices and the naira cannot be overlooked, especially as recent data shows oil prices remain volatile, trading near 62.03 USD per barrel; this is 2.6% below its three-month average. Given Nigeria’s reliance on oil exports, fluctuations in oil prices will continue to play a critical role in influencing the NGN’s performance against the USD.
Market sentiment remains cautiously optimistic for the naira as analysts monitor upcoming data releases from the US that could dictate further direction for the USD. The notable risks highlighted, including potential geopolitical tensions and fiscal concerns impacting the broader US economy, are also factors to keep in mind as the exchange rate dynamics evolve. In summary, while the USD is under downward pressure, the stability of the NGN suggests a cautious but favorable outlook for Nigerian currency in the near term, provided external factors remain manageable.
