Standard Bank revises Naira outlook, projects 3.1% depreciation in 2025 at a stronger level.

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Standard Bank has revised its medium-term outlook for the Nigerian naira, forecasting a 3.1% depreciation against the US dollar in 2025, but at a stronger level than previously anticipated.

In its latest projection, obtained by Nairametrics on Wednesday, the bank expects the naira to close 2025 at ₦1,585.5/$1, compared to its earlier forecast of ₦1,697.5/$1. The revision follows what the bank described as “new market evidence and recent developments” that point to a more stable currency trajectory.

“Based on some new evidence and how activities have panned out in the past month, we now amend our medium-term views on the USD/NGN pair. Specifically, we now expect the NGN to depreciate by a modest 3.1% against the USD in 2025, likely ending this year at 1,585.5 (previous forecast: 1,697.5) and settling at NGN 1,692.6 by December 2026, with a higher possibility of the currency ranging stronger, rather than lower, over the forecast horizon,” the bank stated.

The report noted that political activities and increased fiscal spending ahead of the 2027 general elections could weigh on the naira.

According to the bank, “Electioneering activities are key factors stakeholders should consider as a likely driver of the USD/NGN pair in 2026 and 2027. Primary election activities are expected to begin in Q1:26, with campaigns for the 2027 general election expected to be in full swing from Q3:26. These activities are likely to lead to an increase in dollar demand, which, in addition to increased fiscal spending, should support an increase in money supply.”

Despite these pressures, the bank projected that the Central Bank of Nigeria (CBN) would rely on stronger foreign exchange reserves to stabilise the market and reduce upward pressure on the USD/NGN exchange rate.

The report also highlighted Nigeria’s shifting oil export and import dynamics, noting that the start of operations at the Dangote Refinery has significantly influenced the trade balance

The bank explained: “The recent decline in oil export is largely driven by domestic crude sales, which lowers the amount of crude oil available for exports. Indeed, after outstripping gas sales, crude oil exports declined to a q/q average of USD8.62bn in Q2:24 – Q4:24 when the Dangote Refinery started operations, from USD10.99bn in Q1:24.”

It added: “The reduction in petroleum imports due to Dangote Refinery-induced local refining ensured that oil imports declined for a third consecutive quarter, to a 17-quarter low of USD2.68bn. However, a 24.1% q/q increase in non-oil imports (73.3% of total imports as of Q4:24) saw total imports increasing by 9.3% q/q, to USD10.05bn in Q4:24.”

The revised outlook also aligns with government expectations. In his December 2024 budget presentation, President Bola Tinubu projected significant macroeconomic improvements.

“The 2025 budget is based on the projections that inflation will decline from the current rate of 34.6 per cent to 15 per cent, while the exchange rate will improve from approximately 1,700 naira per US dollar to 1,500 naira,” President Tinubu said.

The updated forecast from Standard Bank provides cautious optimism for a stronger naira in the near term, though risks from political cycles, fiscal spending, and non-oil import growth remain.

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