Naira Expected to Remain Stable Between N1,290 and N1,370 Through October

Nairametrics reports that fundamental analysis projects the naira will remain within a range of N1,290 to N1,370 per US dollar through October. The publication attributes this stability to the Monetary Policy Committee’s recent decision to lower the policy rate to 23%, combined with the seasonal increase in import demand typically observed in the fourth quarter. These factors are expected to limit any sharp appreciation of the currency, resulting in a range-bound path with gradual depreciation.

According to Nairametrics, the Central Bank of Nigeria retains substantial capacity to intervene in the foreign exchange market, supported by foreign reserves exceeding US$55 billion. The analysis notes that these reserves are sufficient to back the naira, yet the central bank prioritizes price discovery and liquidity in the National Foreign Exchange Management System over seeking profits from a stronger currency. Operational reforms have also narrowed the gap between official and parallel market rates, reducing arbitrage opportunities and improving trading volumes in the official market.

The report highlights that while disinflationary trends and increased domestic petroleum processing support real-yield sentiment, lower domestic interest rates reduce the spread available to foreign and domestic investors. This dynamic lowers capital inflows seeking high risk-adjusted returns, creating what Nairametrics describes as a "natural insulating effect on demand for domestic currency." Higher foreign exchange demand from corporates and consumers ahead of the holiday season is expected to keep the naira supported around the N1,300 level.

Global factors also influence the outlook, with the US Dollar Index trading around 101.80 after retreating from multi-month highs. Nairametrics notes that US inflation figures, with annual CPI at 3.7%, have renewed debate about interest rates remaining elevated. Markets are pricing in an 84% probability that the Federal Open Market Committee will leave rates unchanged at its late October meeting. The publication adds that lower US Treasury yields reduce near-term demand for the US dollar, a trend that indirectly affects the naira's trading range.