Analysts have projected that the naira would close the year within the 1,400.00-1,450.00/$ band on the back of moderating inflation.
In a macroeconomic update titled ‘Moderating inflation bodes well for Nigeria’s currency valuation’, the analysts at CardinalStone Research anticipate that the deceleration in inflation will strengthen the national currency.
The National Bureau of Statistics, in its latest Consumer Price Index, disclosed that Nigeria’s headline inflation rate eased to 18.02 per cent in September compared to 20.12 per cent in August 2025. The PUNCH reports that this is the sixth consecutive month of deceleration in inflation and the first time in three years that inflation has fallen below the 20 per cent threshold. The moderation in inflation had been supported by strong base effects amid favourable supply conditions and the seasonal harvest.
Highlighting the effects of the moderation, CardinalStone said, “The ongoing disinflationary trends bode well for currency valuation. Combined with a sustained current account surplus and a steady build-up in FX reserves, this is expected to underpin further naira appreciation. We project FX to close the year within the range of N1,400.00/$-N1,450.00/$.
“The softer inflation outlook reinforces the case for additional monetary easing by the CBN at its November policy meeting. We expect a 100-bps reduction in MPR to 26.0 per cent.”
Not only that, the analysts said that a combination of “lower inflation and an expected policy rate cut is likely to drive further yield compression across the naira credit market. While the curve may remain inverted, we expect a sharper adjustment at the short end of the curve.”
For inflation, the projection is that it would continue to decline and move closer to the 15 per cent target of the Federal Government. “In October, we see scope for further moderation in inflation, as the drivers that were obtainable in September 2025 are likely to persist.”
Expressing similar sentiments were analysts at United Capital in their inflation forecast document, which projected that “Inflation may close the year slightly above the 15 per cent target set in the Federal Government’s 2025 budget speech. We project an average inflation rate of 16.07 per cent for Q4 2025, assuming no external shocks exert additional upward pressure on consumer prices.
“United Capital Research believes this outlook could encourage the Monetary Policy Committee of the Central Bank of Nigeria to consider another interest rate cut at its upcoming meeting scheduled for Monday, November 24, and Tuesday, November 25, 2025.”
Coronation Asset Management noted that while the September inflation print extends the disinflation streak, “It underscores a two-speed economy; food prices are easing quickly, while core inflation remains sticky. The shallow m/m decline in headline CPI is almost entirely a reflection of entrenched service-sector cost pressures.
The MPC at the next meeting in November will likely proceed with a controlled, data-dependent easing path to preserve macro stability while still trying to nurture the developing recovery in the economy.”
Meanwhile, the naira faced renewed pressure in the foreign exchange market in the past week as it depreciated, driven by dollar demand outpacing supply. This is a development that took place despite sustained interventions by the CBN in the FX market. Naira closed at 1,475.35/$, weaker by 1.38 per cent (N20.18) than the previous week’s 1,455.17/$.
At the parallel market, Cowry Assets Management Limited disclosed that the naira slipped 0.61 per cent to N1,484/$1, reflecting lingering FX demand pressure and cautious market sentiment.
Despite the weakening of the naira at the FX market, Nigeria’s external reserves continued to inch up to stand at $42.68bn as of Thursday, buoyed by steady oil receipts, improved non-oil inflows, and a robust trade surplus, which have collectively supported FX stability efforts.
