Citi Projects Naira to Weaken to ₦1,700/$ by 2026 as CBN Cuts Rates and Oil Prices Fall

The Nigerian naira, which has shown surprising stability throughout 2025, may lose some of its strength next year, according to a new forecast from Citigroup. The global financial services firm expects the local currency to weaken to between ₦1,650 and ₦1,700 per US dollar by mid-2026. The projection comes as the Central Bank of Nigeria (CBN) begins easing its strict monetary policy while global oil prices soften — both key drivers of Nigeria’s foreign exchange inflows.

David Cowan, Citi’s lead economist for Africa, told clients on Wednesday that the combination of lower interest rates and weaker crude prices could gradually pressure the naira. “If, as we expect, inflation starts to ease next year and the CBN more aggressively relaxes its tight monetary stance, we anticipate some modest depreciation of the naira as 2026 progresses,” Cowan said in the note.

The CBN on Tuesday cut its benchmark interest rate by 50 basis points to 27 percent, marking the first rate reduction in five years. The move signals a shift in policy as inflation, which had spiked in previous years, now shows signs of cooling. The apex bank also indicated it may continue trimming rates if disinflation persists, a policy shift that investors are watching closely.

Consumer prices slowed for the fifth consecutive month in August to 20.12 percent, down from 21.9 percent the month before. This decline was fueled by easing food and energy costs, as well as the naira’s relative strength in 2025. The local currency has appreciated nearly 4 percent this year, supported by stronger oil exports, central bank dollar interventions, and fresh portfolio inflows into Nigerian bonds, with the naira trading at about ₦1,490.4 per dollar on Wednesday.

However, Citi warns that the trend may not last. If crude oil prices drop as expected next year, Nigeria’s foreign exchange earnings could take a hit, reducing the cushion that has supported the naira’s rally. The projection stands in stark contrast to 2024, when the naira lost over 40 percent of its value following landmark reforms by President Bola Tinubu, including the removal of fuel subsidies and liberalization of the foreign exchange market.

source: business day