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Standard Bank Revises Naira Outlook, Sees 3.1% Depreciation but Stronger End-2025 Rate - TVC360
Bank projects naira to close 2025 at N1,585.5/$1, better than earlier forecast of N1,697.5/$1.
Standard Bank has updated its medium-term forecast for the Nigerian naira, projecting a modest 3.1% depreciation against the U.S. dollar in 2025,but at a stronger level than previously anticipated.
In its latest report released on Wednesday, the bank now expects the naira to close the year at N1,585.5 per dollar, revising its earlier projection of N1,697.5/$1. The change, it said, reflects recent macroeconomic shifts and signs of growing stability in Nigeria’s foreign exchange environment.
“Based on new evidence and recent market activity, we have amended our medium-term outlook on the USD/NGN pair,” the bank stated. “We now expect the naira to end 2025 at N1,585.5 and reach N1,692.6 by December 2026.”
2027 Elections Could Weaken the Naira
While the 2025 outlook shows relative optimism, political risk factors loom on the horizon. Standard Bank warned that pre-election activities in 2026 could put pressure on the naira.
“Electioneering activities are key factors stakeholders should consider as a likely driver of the USD/NGN pair in 2026 and 2027,” the bank noted.
With primary elections expected to begin in Q1 2026 and full-blown campaigns by Q3, the bank anticipates increased dollar demand and fiscal spending, both of which could spur higher money supply and weigh on the currency.
However, it added that a stronger external reserves position should enable the Central Bank of Nigeria (CBN) to cushion potential volatility.
Crude Export Decline Linked to Domestic Supply Shift
The report also highlighted changes in Nigeria’s oil and gas export dynamics, pointing to a drop in crude export earnings between Q2 and Q4 of 2024, largely due to rising domestic sales.
After averaging $10.99 billion in Q1 2024, crude export revenues fell to $8.62 billion per quarter in the second half of the year, coinciding with the operational takeoff of the Dangote Refinery.
“The refinery’s demand has reduced the volume of crude available for exports,” the bank noted.
On the import side, petroleum product imports continued to decline hitting a 17-quarter low of $2.68 billion in Q4 2024. However, a 24.1% quarterly increase in non-oil imports, which now account for 73.3% of total imports, drove total imports to $10.05 billion, up 9.3% from the previous quarter.
Context: Budget Assumptions Face Market Test
President Bola Tinubu, while presenting the 2025 national budget, had expressed confidence in an improved exchange rate, projecting the naira to strengthen to N1,500/$1 and inflation to fall to 15% from the current 34.6%.
However, Standard Bank’s more cautious projection suggests the naira may not fully meet that target, despite being on a firmer footing than expected. Economic experts have also voiced skepticism about the administration’s ambitious macroeconomic goals.
