USD/NGN Outlook:
The USD/NGN exchange rate is likely to decrease as it currently trades below the 90-day average and near recent lows. The combination of external pressures and domestic policy is affecting the Naira’s value.
Key drivers:
• Rate gap: The Federal Reserve's interest rate policies tend to bolster the US dollar, while the Central Bank of Nigeria is focused on stabilizing the Naira, which may limit its strength.
• Risk/commodities: Oil prices are at 90-day highs, which typically supports the Naira; however, volatility can undermine this effect.
• One macro factor: Nigeria's external reserves have increased significantly, offering support for the Naira against shocks, but inflation is projected to rise sharply.
Range:
Expect the USD/NGN to drift within its recent range, influenced by macroeconomic factors.
What could change it:
• Upside risk: A significant increase in foreign investments could improve the Naira's value.
• Downside risk: A sharp rise in U.S. interest rates could strengthen the USD, putting more pressure on the Naira.
