Naira Sees Steady Appreciation as Forex Stability Improves
Thank you for reading this post, don't forget to subscribe!The naira has shown consistent improvement over the last 21 days, with increased stability in Nigeria’s foreign exchange market. On Friday, FX dealers in Lagos traded the naira at N1,490/$ on the parallel market, while the official rate on the Nigerian Foreign Exchange Market (NFEM) closed at N1,502/$.
In comparison to N1,620/$ at the start of February, the parallel market has seen a N130 gain for the naira, highlighting significant appreciation. However, on the official market, the naira exchange rate has risen slightly from N1,477.9/$ on January 31 to N1,502/$ on Saturday.
Experts attribute the improved exchange rate stability to measures implemented by the Central Bank of Nigeria (CBN), including the BMatch electronic matching system, the forex code of conduct, and a focus on enhancing market transparency. Prof. Uche Uwaleke, President of the Capital Market Academics of Nigeria, explained that these measures have held banks accountable, leading to better market outcomes.
The increased influx of remittances and foreign portfolio investments has also been a driving factor. The CBN’s engagement with international money transfer operators has boosted forex inflows, improving liquidity and stability.
Looking ahead, Uwaleke is optimistic about the sustainability of the naira’s stability, citing increased oil production (currently 1.54 million barrels per day) and steady crude oil prices as key supports for the exchange rate.
Jimi Ogbobine, Head of Agusto Consulting, also echoed similar views, noting that the naira’s recent gains are due to improved forex supply conditions driven by increased oil production and the rise in foreign portfolio investments.
However, experts caution that while stability is a positive sign, a stronger naira is needed to alleviate inflationary pressures. Uwaleke emphasized that stability at a high exchange rate is not enough; the naira needs to appreciate further to effectively tackle inflation.
