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Recent gains recorded by the Nigerian naira may be short-lived, with the currency projected to weaken modestly before the end of 2026, according to a new report by BMI, a Fitch Solutions company.

In its latest report titled “Sub-Saharan Africa FX Roundup: 2026 Will Be A Story Of Stability For Some And Strength For Others,” BMI noted that although the naira has strengthened in early 2026, underlying pressures suggest a gradual depreciation over the course of the year.

The naira closed the week at N1,358/$1, extending its recovery.

The currency has appreciated by 5.8% on the official market so far in 2026, building on a 7.0% gain recorded in 2025.

BMI said it expects the naira to weaken moderately from current levels, arguing that the recent rally is unlikely to be sustained.

The report added that as inflation eases from an average of 23.3% in 2025 to a projected 14.5% in 2026, domestic demand is likely to strengthen, increasing foreign exchange (FX) requirements.

However, BMI noted that any depreciation in 2026 would be modest compared to recent years. It cited Nigeria’s wide interest rate differential relative to other frontier markets and improved investor sentiment toward emerging markets as factors that could sustain portfolio inflows and support FX supply.

By year-end, it had strengthened to N1,429/$1, improving from N1,450.01/$1 at the start of December and outperforming its January 2025 opening rate of N1,538.50/$1.

BMI expects major Sub-Saharan African (SSA) currencies to show greater stability in 2026 compared to previous years, supported by favourable global conditions.

The firm said global conditions remain broadly supportive, with its team projecting the US dollar index (DXY) to trade within the 95–100 range, indicating muted demand for safe-haven US assets.

It added that appetite for higher-yielding emerging and frontier market assets remains strong, as reflected in early 2026 gains in the JP Morgan EM FX Risk Appetite Index. Reform momentum, improving fiscal dynamics, and continued engagement with the IMF were also cited as supportive factors for investor confidence in the region.

Nigeria’s external reserves have climbed above $47 billion for the first time in about eight years, reinforcing confidence in the country’s external position.

The improvement was partly attributed to structurally lower fuel imports, supported by increased domestic refining capacity, including output from the Dangote refinery.