Naira is expected to gain stability after a sharp decline in the US dollar, following the Democratic Party’s capture of both chambers of the US Congress in the midterm elections, analysts said on Tuesday.
The political shift in Washington has prompted overseas investors to reposition assets in anticipation of possible fiscal policy changes and adjustments to interest rate expectations from the Federal Reserve, putting downward pressure on the greenback.
Democrats secured victories in several Republican-leaning districts and flipped at least six Senate seats, with projections indicating control of both the House and Senate.
President Donald Trump said he could “get along with a House and Senate that are controlled by the opposite party” if they were willing to work with him.
A Democratic-controlled Congress is widely viewed as negative for the dollar, as it raises expectations of increased regulation, particularly on technology and artificial intelligence sectors, while potential gridlock could limit aggressive tax cuts and spending measures.
Analysts noted that a softer dollar, combined with Nigeria’s high monetary policy rate above 20 per cent, could attract foreign portfolio investors seeking higher yields in emerging and frontier markets. Increased inflows into Nigerian OMO bills and sovereign debt would boost dollar liquidity in the Nigerian Autonomous Foreign Exchange Market (NAFEM), supporting the naira.
The Central Bank of Nigeria is seen as better positioned to defend the currency and stabilise the exchange rate in the near to medium term, aided by resilient external reserves and oil revenues.
Traders are closely watching upcoming decisions by the US Federal Reserve and Nigeria’s Monetary Policy Committee for further direction on interest rates.
