Naira Strengthens To N1,535/$1 As Market Confidence Improves

The Naira appreciated to N1,535 per dollar in the parallel market, also known as the black market, as traders reported lower demand for the dollar and improved liquidity conditions. This represents a gain of N25, or 1.6%, compared to Monday’s rate of N1,560 per dollar.

Street traders and online trading platforms confirmed the shift, with some market participants attributing it to increased dollar supply and reduced speculative trading. A currency trader noted, “There is not much demand in the market, but we have enough dollars.”

Naira Strengthens in the Official FX Market

The Naira also recorded gains in the official foreign exchange (FX) market, according to figures released by the Central Bank of Nigeria (CBN).

At the Nigerian Foreign Exchange Market (NFEM), the currency closed at N1,510 per dollar, showing a slight improvement from the previous day’s N1,512 per dollar. Market data revealed that the highest exchange rate quoted by authorized dealers remained at N1,515 per dollar, the same as Monday, while the lowest exchange rate was N1,504 per dollar for two consecutive days.

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CBN Reforms Boost Confidence in Naira

CBN Governor Olayemi Cardoso highlighted ongoing reforms in the financial markets to stabilize the Naira and reduce disparities between the official and black market rates.

He noted that past policies had widened the gap between the parallel and official exchange rates, at times reaching 60%. However, with improved market confidence and consistent monetary policies, the difference has now narrowed to just 4-5%.

Cardoso also emphasized the importance of stronger economic ties between Nigeria, the Middle East, and the Nigerian diaspora. He stated that such partnerships could increase remittance inflows, providing more foreign exchange liquidity to stabilize the market.

Measures to Strengthen the Naira

To enhance transparency and efficiency in the forex market, the CBN has introduced several key reforms, including:

• An electronic matching system to improve trade visibility.
• A foreign exchange code of ethics, which all Nigerian banks have signed to ensure market compliance.

As a result of these reforms, Cardoso disclosed that Nigeria’s foreign reserves have exceeded $40 billion, the highest in nearly three years. However, the latest data from the CBN website shows that foreign reserves have slightly declined to $38.88 billion as of February 17, 2025.

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Challenges Facing the Naira

Despite recent improvements, Nigeria has faced significant economic challenges, including:

• Capital flight, as investors pulled funds out of the country.
• Currency depreciation, which eroded purchasing power.
• High inflation, affecting consumer prices.
• A backlog of unresolved forex transactions, causing delays in international trade.

Cardoso acknowledged these issues and stated that his administration has prioritized restoring market confidence by clearing forex backlogs and reinforcing economic stability measures.

Outlook for the Naira

Market analysts believe that the Naira could further stabilize if Nigeria continues implementing strong economic policies and increasing foreign exchange inflows through exports and remittances.

While the current appreciation of the Naira reflects improved market conditions, the long-term sustainability will depend on the effectiveness of CBN’s monetary policies and overall economic stability.