The naira extended its gains on Tuesday, with the dollar quoted at ₦1,484.13 in the official foreign exchange (FX) market. The figure marks a ₦13.33 appreciation from Monday’s ₦1,497.46 close, according to Central Bank of Nigeria (CBN) data.
At the parallel market, the naira steadied at ₦1,525 per dollar, underscoring improved stability across exchange channels. Market analysts noted that lower demand for foreign exchange, linked to stricter bank card FX policies, has given naira bulls the leverage to hold below the ₦1,500/$ support level.
Year-to-date, the local currency has appreciated by ₦43.9 or 2.9%, compared with its opening of ₦1,541.36 at the start of 2025. This trend suggests a period of resilience after a turbulent 2024, when the naira faced severe depreciation pressures.
Currency traders believe this gradual strengthening could continue if macroeconomic indicators align in the coming months. For now, the naira’s relative calm is offering some predictability to businesses and consumers accustomed to sharp swings in FX markets.
Inflation Moderation Provides Support for Naira Bulls
Nigeria’s inflation rate eased for the fifth consecutive month, boosting prospects for the currency. The National Bureau of Statistics (NBS) reported headline inflation dropped to 20.12% in August, from 21.88% in July.
Month-on-month inflation slowed to 0.74% in August, down from 1.99% in July, signaling weaker price pressures across the economy. Food inflation, a key driver, also cooled, falling to 1.65% monthly from 3.12%, though the year-on-year figure remained high at 21.87%.
Exchange Rate Stability Calms Price Pressures
The exchange rate’s stability in August, trading between ₦1,530 and ₦1,540 per dollar, contributed to easing inflationary pressures. A stronger naira is helping to slow the rise in consumer prices, particularly for food and imported goods.
This development is crucial in a country where high living costs have weighed heavily on households and businesses. For policymakers, it reflects a potential turning point in efforts to balance currency markets and consumer prices.
Reserves Edge Higher
Nigeria’s gross external reserves rose by $357.84 million, or 0.87%, reaching $41.66 billion as of Thursday. Analysts attribute the increase to steady daily accretions, offering the CBN additional firepower to manage FX market dynamics.
Higher reserves improve investor sentiment, as they provide reassurance about Nigeria’s ability to support the currency during volatility. With reserves trending upward, the outlook for naira stability strengthens further.
Global Market Backdrop Shapes FX Trends
The U.S. dollar remained steady ahead of a key Federal Reserve policy meeting, with the Dollar Index (DXY) at 96.70. Markets widely expect a 25-basis-point rate cut, as slowing labor market data pushes the Fed toward easing.
A softer dollar could indirectly support emerging-market currencies like the naira, particularly if global risk sentiment improves. However, political uncertainties around the Fed’s independence and U.S. growth prospects remain potential headwinds.
Latest U.S. Census Bureau data showed retail sales rose 0.6% in August, beating expectations. It marked the third consecutive month of growth, suggesting consumers remain resilient despite inflationary headwinds.
For Nigeria, global demand patterns and U.S. monetary policy decisions could shape capital flows and dollar liquidity. As such, the interplay between domestic inflation and international conditions will remain critical for the naira’s trajectory.
