The Nigerian Naira is showing signs of potential strengthening in the foreign exchange market, bolstered by recent actions from the Central Bank of Nigeria (CBN) and the anticipated impact of the Dangote Refinery. The Nigerian Foreign Exchange Market (NFEM) had an opening rate of about N1,353.54/$ and is expected to trade near N1,350/$, with daily averages and closing rates ranging from N1,353/$ to N1,355/$.

The official window for the Naira remains stable and bullish, even demonstrating a slight increase in strength compared to early February. Over the past week, the Naira traded between N1,348/$ and N1,358/$. This week seemingly lacks significant wholesale or retail FX auctions.

Recent CBN initiatives include enhancing retail FX liquidity by reducing the disparity between official and parallel market rates. This is being achieved by allowing licensed Bureau de Change (BDC) operators to purchase up to $150,000 weekly, with the goal of improving retail supply. If the CBN conducts major FX auctions this week, the official rate is projected to settle at N1,340/$. The parallel market rate for the Nigerian Naira against the US dollar has been between N1,420/$ and N1,435/$.

According to the 2026 Macroeconomic Outlook, the CBN anticipates external reserves to grow to $51 billion. This forecast has increased optimism regarding the Naira, which has faced pressure due to high dollar demand. The Monetary Policy Rate (MPR) currently stands at 27%. This high MPR is intended to attract foreign investment into Naira assets and potentially slow down the Naira’s depreciation.

Nigerian headline Inflation is showing signs of moderation, which is a positive signal for the Nigerian Naira. If it approaches 15%, the CBN’s rationale to devalue the Naira will diminish.

This positive outlook is further supported by increased oil revenue and the full operational capacity of the Dangote Refinery, which is expected to reduce dollar expenditure on oil imports. Dangote Petroleum Refinery attained its fully designed capacity of 650,000 barrels per day of crude oil. It has also marketed 62% of the fuel locally, significantly reducing the country’s dependence on fuel imports.

The US Dollar Index (DXY) experienced weak trading amid holidays in the US and China. The index traded at 97 with US borders closed for the holiday, and China closed for the Lunar New Year, The DXY shows a slight recovery from the previous session’s losses.

January’s US CPI stood at 2.4% YoY, down from 2.7% in December and below the 2.5% forecast. Market expectations for inflation were a 0.3% increase, but the actual rise was 0.2% from December.

Despite a lower-than-expected unemployment rate, US nonfarm payrolls surged at their highest rate in over a year, indicating ongoing stabilization.

Chicago Fed President Austan Goolsbee noted that the latest CPI report had both positive and concerning elements, especially the persistently high services inflation rate. He stated that the strong employment data in January “probably indicates stability,” highlighting that the labor market remains relatively stable with only slight cooling. Goolsbee added that there is still potential for interest rates to decrease further.