The Nigerian naira has recently demonstrated notable resilience against the U.S. dollar in both official and parallel foreign exchange markets. As of mid-week trading, the naira appreciated to approximately N1,535 per dollar in the parallel market, improving from N1,560 the previous day. This upward trend is mirrored in the official market, where the naira strengthened to N1,510 per dollar on Tuesday, up from N1,512 on Monday.
Central Bank Reforms and Market Interventions
Several factors contribute to this positive trajectory. The Central Bank of Nigeria (CBN) has implemented reforms aimed at enhancing transparency and efficiency in the foreign exchange market. Notably, the introduction of the Electronic Foreign Exchange Matching System (BMatch) in December 2024 has facilitated anonymous order placements among authorized dealers, leading to more accurate price discovery and reduced market distortions. Additionally, the Nigeria Foreign Exchange Code, introduced by the CBN in January 2025, has established guidelines for ethical conduct, governance, and risk management within the market. These measures have collectively bolstered confidence among investors and market participants, contributing to the naira’s appreciation.
In addition to structural reforms, the CBN has intervened directly in the foreign exchange market by selling $25,000 weekly to Bureau de Change operators. This intervention aims to stabilize the market and curb speculative activities that could undermine the naira’s value.
Expert Perspectives: Caution Amidst Appreciation
Despite these gains, some experts advise caution. Ayo Teriba, Chief Executive Officer of Economic Associates, notes that while the naira has improved from lows of N1,900 to the dollar, it remains weaker than the N1,300 rate observed in April of the previous year. He emphasizes that, in this context, the current rate of N1,500 per dollar is not particularly encouraging.
Teriba further points out that despite the naira’s recent gains, inflation remains at elevated levels, with the country’s consumer price index showing a rate of 24.48 percent in January. He advocates for more aggressive measures to strengthen the naira, suggesting that the government should aim for an exchange rate below N1,000 to the dollar to positively impact Nigeria’s GDP value and per capita income.
Market Outlook: Stability and Future Projections
Market analysts suggest that the narrowing gap between the official and parallel market rates indicates a more stabilized foreign exchange environment. This convergence is seen as a positive development, reflecting the effectiveness of recent policy interventions and a potential reduction in speculative trading activities.
As Nigeria continues to navigate its economic landscape, the sustained strengthening of the naira could have broader implications for trade, investment, and overall economic growth. Maintaining this momentum will require ongoing commitment to policy reforms, effective market oversight, and addressing underlying economic challenges to achieve a more robust and stable currency valuation.
