Naira opened 2026 with renewed confidence.
After years of decline, stability felt unfamiliar.
By mid-February, it traded near ₦1,358/$1.
Naira Early Gains Extend
So far, it has gained 5.8% this year officially.
That builds on a 7.0% rise in 2025.
As a result, the rebound has lifted cautious optimism.
However, a new report by BMI tempers expectations.
Forecast Signals Weakening
In its latest regional currency review, BMI warns that gains may fade.
Specifically, the firm forecasts gradual weakening through 2026.
It expects the rate to reach ₦1,550/$1 by December.
Therefore, it views current strength as temporary.
Meanwhile, analysts project inflation to slow sharply this year.
They expect it to fall from 23.3% to 14.5%.
Consequently, lower inflation could lift domestic demand.
In turn, stronger demand would increase foreign exchange needs.
Already, pressure is emerging across markets.
For instance, the parallel rate trades 6–7% weaker.
Thus, this divergence suggests the official rate is overvalued.
Support Factors Remain
Nevertheless, BMI does not expect sharp depreciation.
Instead, it expects only moderate weakening.
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Importantly, high interest rates may attract portfolio inflows.
At the same time, improved emerging market sentiment could support supply.
Across the region, currencies have opened the year strongly.
For example, the Zambian kwacha has gained 16%.
Likewise, the naira is up nearly 6%.
Similarly, the South African rand has risen 4.1%.
Even so, BMI does not foresee major sell-offs.
Globally, conditions remain supportive.
BMI expects the US dollar index to trade between 95 and 100.
This range signals muted demand for safe-haven assets.
Meanwhile, investors continue to favour higher-yielding frontier markets.
Reforms and IMF engagement further underpin confidence.
At home, Nigeria’s reserves have strengthened in recent months.
External reserves now exceed $47 billion.
In December 2025, reserves covered nine months of imports.
Partly, lower fuel imports have driven this trend.
Output from the Dangote refinery has reduced dollar demand.
Overall, the outlook remains balanced.
Stability has returned, yet pressures persist.
If projections hold, gains may ease gradually.
Ultimately, 2026 may reward caution over celebration.
