Analysts at Cordros Securities have projected a gradual but sustained recovery of the Nigerian naira, forecasting that the currency could close 2026 at around N1,350 per US dollar, supported by improving macroeconomic fundamentals and a more disciplined policy environment.
The outlook is contained in Cordros’ 2026 macroeconomic and market report titled “Building Momentum Beyond the Rebound,” which reviews recent developments across the foreign exchange market, fiscal policy, external balances, and global economic conditions.
According to the report, the naira is expected to trade within a N1,450 to N1,350 range during 2026 as lingering distortions in the foreign exchange market ease and confidence gradually returns. The analysts believe that while volatility may persist in the short term, the overall trajectory points toward appreciation rather than renewed weakness.
Drivers of naira stability and appreciation
Cordros analysts noted that a combination of factors is expected to support the naira over the medium term. These include a more favourable foreign exchange environment, higher external inflows, and sustained policy discipline by monetary and fiscal authorities. Together, these developments are expected to strengthen investor confidence and improve liquidity in the FX market.
As confidence builds, the naira is projected to move closer to its estimated equilibrium value of N1,230 per dollar, reflecting a narrowing gap between official and market pricing. The analysts emphasised that consistent policy execution would be critical in anchoring expectations and avoiding a return to speculative pressures.
However, the report also highlighted downside risks that could derail the recovery. Cordros warned that if election-related spending leads to excessive growth in money supply, oil prices fall below $58 per barrel for a prolonged period, or global financial pressures intensify, the naira could come under renewed strain.
In such a downside scenario, adverse trade dynamics and weaker inflows could push the exchange rate as weak as N1,550 per dollar by the end of 2026.
Undervaluation remains significant
Despite the recent gains recorded in 2025, Cordros believes the naira remains fundamentally undervalued. The report referenced estimates from the International Monetary Fund, which place Nigeria’s Real Effective Exchange Rate (REER) at about 23.6% below fair value, implying an equilibrium exchange rate of roughly N1,163 per dollar.
This undervaluation, according to the analysts, suggests that the naira still has room to strengthen if macroeconomic reforms are sustained and external conditions remain supportive.
Cordros also explained that it now relies more heavily on the Behavioural Equilibrium Exchange Rate (BEER) framework to assess currency misalignment. The BEER approach links the exchange rate to core economic fundamentals such as productivity differentials, terms of trade, fiscal balances, and risk premia.
Using this model, the firm estimates that the naira is currently undervalued by 19.3%, trading at N1,521.60 per dollar compared to a fair value of N1,230. This represents a significant improvement from the 35.1% undervaluation recorded in 2024, reflecting better FX liquidity, improved sentiment, and tighter macro controls.
2025 market performance in perspective
The naira’s performance in 2025 has marked a notable turnaround after several years of sustained depreciation. The currency began the year at N1,537 per dollar in January and closed the month stronger at around N1,480, representing an appreciation of roughly 4%.
This early momentum faded in February as renewed demand pressures pushed the naira above N1,500, with the currency approaching N1,600 by April and settling around N1,596. The first half of the year ended with only a modest net gain of about 0.4%, as volatility offset earlier improvements.
A more decisive recovery emerged from May onward, supported by a softer US dollar amid global trade tensions and improving FX supply conditions. By June, the naira had strengthened to N1,530, and sentiment continued to improve into the second half of the year.
September marked a key inflection point, with the naira appreciating to N1,476.62 per dollar, followed by further gains in October and November when it traded around N1,445. Although a mild depreciation of about 1% was recorded in mid-December, pushing the currency slightly above N1,450, the naira has largely remained stable within the N1,400 range.
Overall, Cordros notes that the naira’s more than 5% year-to-date appreciation in 2025 represents its first positive annual performance since 2019, reinforcing the view that the currency may be entering a period of relative stability and gradual recovery heading into 2026.
Emmanuel Bassey is a Financial Expert that has worked in the Banking and Finance Industry for over 15+ years across different banks in Nigeria
