The Nigerian naira is expected to maintain its rare stability this year after recording its best outing in more than a decade in 2025, signalling that the various reforms of the government are beginning to bear fruit.
“Improving fundamentals warrant a re-rating of the naira in 2026. We are of the view that the naira could trade within the band of N1,350.00/$–N1,450.00/$,” CardinalStone said in its newly released economic outlook.
The projected appreciation of the currency, according to the report, is supported by improved liquidity in the FX market, growing reserves now at a more than seven-year high and adequate enough to cater to 6.2 months of current external debt payment, significantly higher than that of African peers.
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CardinalStone identified moderating inflation and a current account surplus that reached an all-time high in 2025, including sustained FX transparency and foreign inflows, as supportive for the naira’s strengthening this year.
The report follows the appreciation of the naira for most of 2025, posting a 7.5 per cent gain compared to a 41.4 per cent loss in 2024 and a 48.9 per cent loss in 2023 when the market reforms kicked in.
Africa’s most populous nation relaxed foreign exchange control and devalued its naira in June 2023, a move that saw the currency shed almost 70 per cent of its value. But that policy has equally brought in scarce FX, restored investor confidence, and pushed the country’s current account to surplus.
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To ensure stability and predictability, the central bank began to roll out varying policies, including but not limited to the introduction of the Electronic Foreign Exchange Matching System (EFEMS), designed to enhance transparency and operational efficiency. This reform laid the groundwork for the improvements recorded over the past year.
It has also led to a more stable exchange rate, narrowing the premium between NFEM and BDC rates to 2.11 per cent as of 2025, from 62.23 per cent in May 2023, before the reform.
Liquidity conditions, on the other hand, have also improved in the market, with daily average FX turnover across both the forward and spot markets settling at $421.4 million, over 59 per cent higher than last year’s value.
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Despite the upsides, risks remain. According to CardinalStone, pre-election worries, an unanticipated slump in exports, especially non-oil, and the ongoing global trend of tightening border controls may reduce Nigerian exports, thereby dampening the appreciation of the naira.
Similarly, weaker-than-expected oil prices and a faster-than-expected surge in debt levels, especially external debt, may weaken credit ratings and dampen foreign inflows, putting fresh pressure on the currency.