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There is a growing expectation that the naira could sustain relative stability in 2026, supported by improved liquidity, transparency and market discipline following reforms introduced by the Central Bank of Nigeria (CBN). However, the currency’s performance will depend on several domestic and external factors that could either strengthen or weaken it over the coming year.

Ways the Naira Could Gain Value

Higher oil prices and stronger export earnings

Muda Yusuf, Director and Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said higher oil output remains one of the most critical supports for the naira. According to him, achieving production levels of 1.8 million barrels per day, or even the two million barrels per day projected in the budget, would significantly strengthen the currency.

A rise in global oil prices would further boost foreign exchange inflows, while improved non-oil exports would provide additional support.

“In essence, naira strength depends on domestic productivity and the economy’s capacity for import substitution,” Yusuf said. “Effective liquidity management is also critical. Avoiding excessive money supply growth, controlling deficits, and preventing excess naira liquidity in circulation are essential for sustaining currency stability.”

He added that maintaining strong foreign reserves is another key factor, noting that “as long as reserves are held at healthy levels, the naira will be better positioned to gain or sustain strength.”

Analysts at FBNQuest expect the CBN to maintain its strategic interventions in the FX market and implement initiatives aimed at boosting liquidity and curbing speculative activities.

However, they said downside risks remain balanced, as renewed uncertainty in external conditions could dampen global investor appetite, heightening capital flight risks. “This could potentially constrain FX market liquidity and exert pressure on the naira,” the analysts said.

Increased foreign investment and capital inflows

Stronger investor confidence can attract foreign portfolio and direct investments into stocks, bonds, and real sector projects, according to analysts. These inflows increase the supply of foreign currency and raise demand for the naira. Improved transparency in the foreign exchange market and policy reforms that encourage capital inflows can help strengthen the currency.

Growth in non-oil exports and diaspora remittances

Expansion in agriculture, manufacturing, technology, and services can boost non-oil export earnings. In addition, higher remittances from Nigerians abroad increase foreign currency supply, easing pressure on the naira and supporting appreciation.

Improved fiscal and monetary policy credibility

Stronger fiscal discipline such as lower deficits, controlled borrowing, and consistent government policies combined with clear and predictable monetary policy can enhance confidence in the naira. When investors trust policy direction, currency stability tends to improve.

Exchange rate reforms and greater transparency

Moves toward a unified, market-driven foreign exchange system reduce distortions and speculative pressures. Greater transparency has helped narrow the gap between official and parallel market rates and can strengthen long-term confidence in the naira.

Ways the Naira Could Lose Value

Falling oil prices or lower oil production

Nigeria’s heavy reliance on oil means that any drop in global oil prices or disruption to production could sharply reduce foreign exchange inflows, tightening dollar supply and weakening the naira.

High import demand and dollar pressure

Large imports of refined petroleum products, machinery, food inputs, and other goods increase demand for foreign currency. When dollar demand exceeds supply, pressure mounts on the naira.

Rising inflation and monetary pressure

If inflation remains high relative to Nigeria’s trading partners, the naira’s purchasing power weakens. Investors and businesses may prefer holding foreign currencies, reducing demand for the naira.

Large budget deficits and fiscal stress

Persistent fiscal deficits and rising public debt can undermine confidence and heighten inflation risks. Nigeria’s 2026 budget projections, based on an assumed exchange rate of about N1,400 to N1,500 per dollar, highlight ongoing fiscal pressures that could weigh on the currency.

Declining foreign exchange reserves

A fall in reserves due to debt servicing, FX market intervention, or reduced inflows limits the CBN’s ability to support the naira during periods of stress, increasing downside risks.

Political uncertainty and weak investor confidence

Policy inconsistency, security concerns, or political instability can trigger capital outflows as investors seek safer environments, putting pressure on the naira.

FX volatility under a free-floating regime

While a market-driven exchange rate improves transparency, it also exposes the naira to sharper short-term swings. Without sufficient foreign exchange supply or policy buffers, volatility could weaken the currency in the near term.

Overall, the naira’s performance in 2026 will be shaped by global oil market conditions, domestic productivity, investor confidence, fiscal and monetary discipline, and the pace of structural reforms. A stronger naira typically reflects robust foreign exchange inflows, controlled inflation, and credible policies, while weakness is often linked to forex shortages, high import demand, inflationary pressures, and fiscal stress.