Naira Weakens at Official Window as 2026 FX Outlook Firms Up

The naira slipped against the US dollar at the Nigerian Foreign Exchange Market (NFEM) on Friday as corporate demand for foreign currency picked up, interrupting a four-day rally at the official window.

Data from the market showed that the FX spot rate fell by 0.24 per cent to N1,423.17 per dollar, after touching an intraday high of N1,430, indicating that demand once again outpaced available supply.

The pressure was also evident in the parallel market, where the naira weakened to about N1,465 per dollar, reflecting softer sentiment across both the regulated and informal FX segments.

Despite the short-term pullback, analysts say the broader outlook for the naira in 2026 remains constructive. In its 2026 outlook, AIICO Capital Limited projected that the naira would trade within the N1,350–N1,400 per dollar range, noting that the currency was materially undervalued for much of last year.

Citing CardinalStone Partners Limited data, which showed that the naira appreciated by 7.5 per cent in 2025, marking its first full-year gain in 13 years.

CardinalStone said that while the naira remained undervalued through much of the year, the degree of misalignment reduced significantly compared with 2024.

According to the investment firm, estimates from fundamental exchange-rate models suggest that the naira’s undervaluation narrowed from over 35 per cent in 2024 to below 20 per cent in 2025, signalling a gradual convergence towards fair value.

Analysts attributed this adjustment to stronger external inflows from foreign portfolio investors, improving current account dynamics and more disciplined FX management by monetary authorities.

AIICO Capital noted that although the naira did not fully return to its estimated fair value in 2025, it demonstrated markedly stronger resilience and stability. The firm said reduced depreciation pressures, firmer external buffers and improving investor confidence have laid the groundwork for further consolidation and potential appreciation over the medium term.

Looking ahead, AIICO expects the naira to strengthen towards the N1,400–N1,350 per dollar range as FX market inefficiencies continue to unwind, external inflows improve and consistent policy discipline supports investor confidence.

Analysts say these factors should allow the exchange rate to align more closely with underlying economic fundamentals, even as short-term volatility persists.