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USD/NGN: Top catalysts fueling the Nigerian naira rally

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September 25, 2025
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USD/NGN: Top catalysts fueling the Nigerian naira rally
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The Nigerian naira has staged a strong comeback this year, helped by the substantial demand for it bonds, falling US dollar, and supportive technicals. The USD/NGN exchange rate was trading at 1,487 on Thursday, down from the year-to-date high of 1,609.

The Nigerian naira has surged amid carry trade bets

One reason why the Nigerian naira has surged this year is that it has become a popular carry trade pair. A carry trade is a situation where investors borrow from a low-interest-rate country and invest in a higher-yielding one. 

In this case, interest rates in Nigeria have remained above 30% in the past few months, while in the United States, they have remained below 5%. As such, this divergence has made it viable for investors to allocate money in Nigerian bonds in the past few months. 

This carry trade could continue as the Federal Reserve has started to cut interest rates. It slashed rates by 0.25% last week and officials pointed to more cuts this year. 

Meanwhile, the Central Bank of Nigeria (CBN) also slashed rates for the first time in five years on Wednesday. It slashed interest rates to 27%, in line with what analysts polled by Bloomberg and Reuters were expecting. 

The bank cited the fact that inflation was heading downwards, a trend that will continue in the coming months. Most importantly, Governor Olayemi Cardoso hinted that the bank will continue cutting rates if the current fundamentals hold. In a note, analysts at Citi said:

“If, as we expect, inflation starts to ease next year and the CBN starts to more aggressively ease its tight monetary policy stance, we would expect some modest pressure on the naira as 2026 progresses.”

Nigeria’s economy has some tailwinds

The Nigerian naira has also jumped because of the tailwinds in the country’s economy. For example, recent data showed that tax collection have jumped this year, helping to narrow the budget deficit. 

Tax collections rose to N3.64 trillion in September, up by 411% from the same period last year. Those collected in the year’s first half stood at over $9.45 billion, up by 43% from the same period last year. Most notably, non-oil tax revenue has driven this growth trajectory.

The Nigerian economy also see some important tailwinds from the recently launched Dangote oil refinery. Data shows that the refinery is now producing over 57 million liters of petrol daily, which is enough to meet the country’s demand and boost exports.

While the refinery is now importing crude oil, Dangote has hinted that he will focus more on Nigerian oil in the coming months. 

USD/NGN technical analysis 

USD/NGN chart | Source: TradingView

The USD/NGN exchange rate has also dropped because of its technicals. It formed a death cross recently as the 50-day and 200-day moving averages crossed each other. 

The pair has also formed an inverse cup-and-handle pattern, which often lead to more downside. Therefore, a move below the lower side of the cup at 1,476 will point to more downside, potentially to 1,400 in the near term.

The post USD/NGN: Top catalysts fueling the Nigerian naira rally appeared first on Invezz


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