Market News

BY  Prisca Ndu 

…currency projected to trade within N1,470 to N1,520

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The Central Bank of Nigeria (CBN) is expected to prioritise exchange rate stability rather than pursue aggressive appreciation of the naira in 2026, as policymakers focus on consolidating recent gains and anchoring market confidence. This is according to SBM Intelligence, which projects that the naira will trade within a relatively narrow band of N1,470 to N1,520 per dollar over the year.

In its latest outlook, the Africa-focused geopolitical research and strategic communications firm said the expected stability would be supported by improved government revenue performance and sustained crude oil production, both of which are critical to foreign exchange inflows and reserve accretion.

The naira has maintained relative stability across both the official and parallel segments of the foreign exchange market since the launch of the Electronic Foreign Exchange Matching System in December 2024. The introduction of the platform marked a major step by the CBN to improve transparency, price discovery and confidence in the FX market.

At the official Nigerian Foreign Exchange Market, data published by the CBN showed that the naira appreciated by 0.5% on Monday, with the dollar quoted at N1,456.56. This represents a gain of N7.93 compared with the N1,464.49 recorded at the close of trading on Friday. In the parallel market, commonly referred to as the black market, the naira traded flat, closing at N1,482 on Monday, compared with N1,480 at the end of last week.

Meanwhile, Nigeria’s external reserves declined slightly to $45.21 billion as of December 19, 2025, reflecting a drop of $260 million or 0.57% from the $45.47 billion recorded a week earlier on December 12, according to CBN data. Analysts say the modest decline does not materially alter the broader outlook, given expectations of improved inflows over the medium term.

“We expect the CBN to prioritise naira stability over appreciation. We think the naira will trade within a band of 1,470 to 1,520 per dollar throughout the year, aligning with the government’s Medium-Term Expenditure Framework assumption of N1,512 to the dollar,” SBM Intelligence said in the report, which was signed by Ikenna Okonkwo, the firm’s Data Integrity Lead.

Analysts note that foreign exchange stability refers to a situation where a currency’s value remains relatively steady over time, with limited volatility and no sharp swings in either direction. Stability allows businesses and investors to plan with greater certainty, even if the currency does not strengthen materially. Appreciation, by contrast, occurs when a currency gains value against others, requiring fewer units of the local currency to purchase foreign exchange.

Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said the CBN’s current stance reflects a broader focus on strengthening the underlying fundamentals of the FX market rather than targeting a specific level of appreciation or depreciation.

“I think a very strong naira will not necessarily benefit the economy, while a steep naira devaluation will impact the economy negatively,” Olubunmi said, adding that policy consistency and market confidence are more important at this stage than short-term currency gains.

Other analysts, however, see room for modest appreciation if inflows improve further. Bismarck Rewane, chief executive officer of Financial Derivatives Company, projected that the naira could strengthen slightly, trading around N1,450 to N1,500 per dollar. He said stronger foreign reserves, improved FX supply and reduced market pressure could support a gradual firming of the currency.

In its macroeconomic review and 2026 outlook, Afrinvest West Africa also pointed to structural improvements in the FX market following the introduction of the Electronic Foreign Exchange Matching System. Since the platform was launched in December 2024, Afrinvest said the gap between the official and parallel market rates has narrowed to less than N20, from over N100 a year earlier.

According to the firm, the gains reflect the cumulative impact of several strategic policy actions by the CBN since late 2023, including the introduction of a ceiling on banks’ Net Open Position, the lifting of FX restrictions on 43 previously banned items, and attractive yield offerings on Open Market Operation bills targeted at foreign portfolio investors.

Together, these measures have improved liquidity, reduced distortions and strengthened confidence in the FX market. While opinions differ on the scope for appreciation, analysts broadly agree that the CBN’s likely priority in 2026 will be to preserve stability, minimise volatility and sustain investor confidence as broader macroeconomic reforms continue to take hold.