The naira is expected to remain under pressure against the United States dollar throughout 2026, with outcomes ranging from moderate depreciation to a more severe weakening under adverse conditions, according to projections by economist Yemi Kale.
Kale made the assessment while delivering the keynote address at the FirstBank Nigeria Economic Outlook 2026, where he presented a scenario-based forecast for the USD/NGN exchange rate.
The report outlined three possible trajectories for the naira, shaped by assumptions around oil prices, foreign exchange inflows, inflation dynamics and policy consistency.
Under the baseline scenario, the naira is projected to trade within the range of N1,350 to N1,450 per dollar by the end of 2026.
The outlook assumes a modest improvement in Nigeria’s foreign exchange reserves and oil export revenues, relative stability in foreign exchange policy by the Central Bank of Nigeria (CBN), a gradual easing of inflationary pressures, and the absence of major external shocks such as a sharp collapse in oil prices or a significant surge in the global dollar.
Specifically, the report projects that the naira could trade at approximately N1,313 to the dollar by June 2026 and weaken slightly to around N1,340 by December 2026.
It noted that currency risks remain elevated, warranting a cautious outlook rather than expectations of strong appreciation. According to the report, the naira is likely to remain under pressure but avoid a sharp collapse, pointing instead to moderate depreciation or a mild recovery from weaker levels.
In a more optimistic scenario, the naira could strengthen to between N1,200 and N1,300 per dollar by the end of 2026.
This outlook is predicated on a strong recovery in oil prices or successful export diversification, effective foreign exchange reforms by the CBN, improved FX liquidity, a narrowing gap between the official and parallel markets, and a significant decline in inflation that restores investor confidence.
However, the report cautioned that even at N1,200 per dollar, the naira would still be considerably weaker than historical benchmarks, highlighting Nigeria’s lingering structural economic challenges.
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Under the worst-case scenario, the naira is projected to weaken further to between N1,550 and N1,650 per dollar, or even beyond, by the end of 2026.
This scenario assumes weak oil prices or production disruptions that reduce FX inflows, a deepening FX liquidity crisis potentially forcing further devaluation, rising inflation, widening fiscal deficits and a loss of investor confidence.
While described as extreme, the report noted that the scenario remains plausible given Nigeria’s structural vulnerabilities, including heavy import dependence, foreign exchange mismatches and persistent inflationary pressures.
Beyond exchange rate projections, the outlook anticipates a gradual rebuilding of Nigeria’s external reserves toward $45 billion by 2027, driven by higher remittance inflows, improved oil receipts and renewed portfolio investment.
Policy consistency—particularly transparent FX management and fiscal discipline—was identified as critical to sustaining investor confidence and strengthening Nigeria’s balance-of-payments position.
The report also highlighted the growing impact of local refining capacity in reducing reliance on petroleum imports, saving the country billions of dollars in foreign exchange annually.
In addition, export growth in agriculture, manufacturing and services under the African Continental Free Trade Area (AfCFTA) is expanding Nigeria’s non-oil FX base.
Nigeria’s debt-to-GDP ratio is expected to stabilise at around 40 per cent through 2027, supported by domestic financing and longer debt maturities.
However, the report raised concerns about debt affordability, noting that the interest-to-revenue ratio exceeds 70 per cent, reflecting underlying fiscal stress despite relatively stable headline debt levels.