The Naira is showing signs of stability, although it remains under pressure from global geopolitical tensions, in contrast to the extreme volatility of previous years.
A new “normal” has been established for the exchange rate as the Central Bank of Nigeria (CBN) uses its historically high reserves to manage liquidity.
Markets predict the Naira will fluctuate between N1,350/$-N1,400/$ by the end of the week.
Any further escalation in the Middle East could push the parallel market rate back toward N1,450/$ as investors seek the safety of the dollar. Naira bulls may push toward N1,300 against the dollar if oil production surpasses 1.6 million barrels per day in the mid-term, coupled with direct interventions from the CBN.
Nigeria and other frontier markets experience investment outflows during periods of uncertainty in the Middle East. Investors tend to withdraw funds from Nigeria and similar markets and move investments into safer instruments like the US dollar, US Treasury bonds, and gold.
The main support for naira’s stability is the increase in Foreign Exchange (FX) Reserves, which surged to $50.45 billion in February 2026, a 13-year high, while the naira has strengthened somewhat year-to-date, with gains of about 7 to 9 percent.
Nigerian Apex Bank now holds about 10 months of cover, demonstrating how much ‘firepower’ the Central Bank of Nigeria (CBN) must intervene in the market and satisfy dollar demand.
For the first time in a long time, amid a tightening cycle, the CBN has begun to cut rates, showing confidence in economic stability. CBN reduced the MPR (Minimum Policy Rate) to 26.5% from 27% in February 2026.
Generally, a pivot signals a major change in strategy. It reflects a belief that the currency is no longer falling, supporting efforts to bolster the economy, which is expected to grow at 4.3% – 4.7% by 2026.
Dangote Refinery will significantly reduce the CBN’s need to finance billions of dollars of petrol imports each month with a first-of-its-kind capacity of up to 1.4 million barrels per day in the medium term,
Nigeria is now closer to meeting its OPEC production quota of 10.5 million barrels per day, thanks to NNPC’s introduction of new crude grades (Utapate, Obodo, and now Cawthorne), which has increased the daily inflow of hard currency.
The Israeli-Iranian conflict has both positive and negative impacts on Nigeria’s currency. The conflict in the Middle East causes an increase in crude oil prices, which boosts Nigeria’s foreign reserves. However, it also raises overall import prices, potentially leading to more capital flights and increased imports.
The Central Bank of Nigeria (CBN) has more resources to support the naira when crude oil prices rise, given Nigeria’s heavy dependence on oil (about 85%). Since the last attack, Brent crude has increased by 10%, reaching around $75 per barrel.
Nigeria’s FG 2026 budget is pegged to a crude oil benchmark at $64.85 a barrel. The country will be able to save more foreign reserves if the oil price remains higher than the benchmark. Nigeria’s foreign reserves are expected to hover between $45 billion and $51 billion.
Nigeria currently faces challenges, including oil theft and aging oil production infrastructure. These issues hinder the country’s ability to meet its oil production quota of 1.84 million barrels per day, thus limiting the expected growth in foreign reserves.
The US Dollar Index (DXY), which compares the value of the US dollar against six major currencies, declined, closing Monday’s Asian hours at 97.90 after reaching five-week highs.
However, rising Middle East tensions, which increase demand for safe havens, might limit the dollar’s decline.
Over the weekend, the US and Israel launched coordinated strikes on Iran, reportedly killing Ayatollah Ali Khamenei, Iran’s supreme leader.
Tehran retaliated by attacking US assets in neighboring countries, including the United Arab Emirates (UAE), Bahrain, Kuwait, Qatar, Saudi Arabia, Jordan, Iraq, and Syria.
According to US President Donald Trump, hundreds of targets were hit, including air defense systems, nine ships, Revolutionary Guard facilities, and naval infrastructure.
Trump stated that military operations will continue until objectives are achieved. Following missile attacks launched by Hezbollah across the border in the early hours, Israel responded with heavy strikes on Beirut.
