Analysts See Stable Naira as FX Reforms, Weak Dollar Offset Oil Weakness

Nigerian naira is showing signs of sustained stability in the second half of 2025 with analysts forecasting it will hold steady near its average rate of ₦1,556 per US dollar despite declining global oil prices.

The naira, which slumped by 41% in 2024 following the Central Bank of Nigeria’s (CBN) decision to allow a freer float, has remained largely flat so far this year, trading at around ₦1,530 per dollar as of Tuesday.

Analysts from Deutsche Bank AG, Afrinvest, and Cardinal Stone Partners have issued updated forecasts projecting the naira to close 2025 within a tight band of ₦1,550 to ₦1,635 per dollar. Deutsche Bank expects the currency to end the year near ₦1,600 while Afrinvest’s forecast stands at ₦1,577.25.

The currency’s resilience has defied traditional trends that link its performance to oil prices, Nigeria’s dominant source of foreign exchange earnings.

Brent crude oil has slipped below $70 per barrel in recent weeks, but the naira has held firm to reflect the change in the local currency dynamics.

Market analysts attribute this decoupling to a mix of structural shifts in the economy, increased non-oil exports, and reforms in the FX market.

“The naira is undervalued and trading below its fair value based on purchasing power parity,” said Ayo Salami, Chief Investment Officer at Emerging Markets Investment Management Ltd. in London.

Salami added that reduced import demand and improved non-oil revenue streams, coupled with the Dangote Refinery’s impact, are easing historical pressure on the naira.

Africa’s richest man, Aliko Dangote, commissioned the 650,000 barrels-per-day refinery earlier this year, transforming Nigeria into a net exporter of refined petroleum products and reducing the country’s reliance on costly imported fuels.

This development has helped Nigeria conserve foreign exchange reserves, previously drained by fuel imports.

Also analysts say a weaker US dollar — down more than 10% year-to-date — and renewed foreign investor appetite for Nigerian debt instruments have supported naira stability.

A Bloomberg index tracking Nigerian local bond performance has posted a 19% return this year, its best first-half result since 2020. This outpaces the broader emerging-market local debt gauge, which returned 12% over the same period.

Meanwhile, Nigerian equities have gained 18% year-to-date, reinforcing renewed investor confidence.

“The naira has become more correlated with global risk conditions,” said Samir Gadio, Head of Africa Strategy at Standard Chartered Plc. “Improved risk appetite has driven portfolio inflows into Nigeria’s local debt market even with oil prices below $70 per barrel.”

A stable naira offers much-needed relief for businesses and households after years of volatility and devaluation shocks that raised import costs and squeezed profit margins.

The CBN’s ongoing FX reform agenda, aimed at boosting liquidity and transparency, has been widely welcomed by investors seeking more predictable exchange rate management.

Analysts, however, caution that maintaining naira stability will depend on the successful implementation of fiscal discipline, continued foreign exchange reforms, and sustained investor confidence.

For now, stronger non-oil exports, reduced refined fuel imports, a supportive global risk environment, and a weaker US dollar have combined to steady the naira, signalling that Nigeria’s FX market is becoming less dependent on volatile oil receipts alone.