The naira, Nigeria‘s currency, which has been appropriating since the Central Bank of Nigeria (CBN) introduced the new electronic forex trading platform may not rise beyond N1,500 per dollar, according to analysts......Read The Full Article>>.....Read The Full Article>>
The naira appreciated to N1,515 per dollar on the parallel market last Friday as traders offloaded dollars in response to the CBN’s new FX framework. In the official market, the naira also gained 2.08 percent, or N32, closing at N1,535 compared to Thursday’s rate of N1,567, according to CBN data.
Street forex traders are worried that the way the dollar is losing steam, it might fall to N1,400 this week.
Responding to a question as to whether the naira can appreciate to N1,400 this week, Aminu Gwadabe , president of the Association of Bureaux De Change Operators of Nigeria (ABCON) said, “It is achievable considering the enhanced investor confidence, but I want to believe further appreciation levels may not go beyond N1500/$.”
Bismarck Rewane, chief executive officer of Financial Derivatives Company, sees the naira appreciating to N1,525 per dollar in 2025.
On Tuesday, November 26, 2024, the CBN issued a directive requiring all banks operating in the interbank FX market to adopt the Bloomberg BMatch system for trading. The platform, which became operational on December 2, 2024, aims to enhance transparency and operational efficiency in Nigeria’s FX market.
The recent appreciation of the naira is the result of several contributing factors, according to Gwadabe.
He highlighted a mix of investor confidence, improved foreign exchange inflows, and market reforms as drivers of the currency’s rebound.
“The increasing level of confidence among portfolio investors has resulted in substantial dollar inflows, as evidenced by the oversubscribed bond issues. This has significantly helped the naira recover,” Gwadabe stated.
He pointed to improved crude oil and gas output, which has bolstered Nigeria’s foreign exchange reserves, as well as rising diaspora remittances.
“Diaspora remittances have risen to about $600 million monthly through international money transfer operators (IMTOs), contributing to the naira’s strengthening,” he noted.
Gwadabe also credited the introduction of the FX Trading and Reporting System (EFEMS) for fostering transparency, accountability, and visibility in the foreign exchange market. “The EFEMS platform has ushered in much-needed reforms, creating a more stable and predictable market environment,” he added.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), has commended recent improvements in the Naira’s exchange rate, describing it as a development that brings relief to individuals and businesses grappling with economic challenges. He highlighted that the strengthening of the currency addresses one of the key drivers of inflation and the high cost of doing business in Nigeria.
“It is a development that gladdens the hearts of individuals and corporates because the exchange rate issue has been one of the biggest challenges facing the economy. It has been one of the biggest drivers of inflation and the high cost of doing business. So, it’s a great relief that we are having this development. Our prayer and hope is that this will be sustained going forward,” Yusuf stated.
Yusuf attributed the naira’s recent stability and appreciation to multiple factors, including an improvement in Nigeria’s foreign reserves, which recently hit the $40 billion mark. He explained that this milestone enhances the CBN’s ability to intervene in the foreign exchange market and reduce volatility.
“In recent times, we have seen an improvement in our reserves, which imply that the CBN has much better capacity to intervene in the foreign exchange market. In fact, the CBN has been intervening to stabilise the currency. Over the past five months, we have seen relative stability in the naira exchange rate, and now we are beginning to see a strengthening of the currency,” he said.
He also credited reforms in the foreign exchange market for boosting autonomous forex inflows, particularly from international money transfers. Yusuf highlighted the issuance of a two billion dollar eurobond by the Nigerian government last week as a significant factor in further elevating investor confidence.
“As confidence improves, speculative demand in the foreign exchange market will reduce, and this is already playing out. The CBN has also been actively cleaning up the foreign exchange environment, addressing malpractices, and eliminating speculative activities, which have contributed to this positive trend,” Yusuf observed.
While acknowledging the progress, Yusuf emphasised the need for sustained fiscal and monetary policy alignment to preserve the current exchange rate stability. He pointed to government spending, fiscal deficits, and debt accumulation as critical variables that could either support or undermine the progress.
“Our fiscal operations should be such that they don’t create liquidity challenges in the economy, which could put new pressures on the Naira. We need to moderate deficits, debt levels, and possibly even government expenditure to complement what is being achieved on the monetary side,” he advised.
Yusuf further called for enhanced efforts to improve oil production and tackle oil theft, stressing that greater oil output would strengthen Nigeria’s forex earnings. He also underscored the importance of supporting local manufacturing and import substitution initiatives, citing projects like the Dangote Refinery as critical to reducing foreign exchange demand for fuel imports.
“We need to support all efforts towards boosting exports—whether crude oil, gas, or non-oil exports. Increasing our foreign exchange earnings is essential to sustaining and even enhancing the currency’s value,” Yusuf further said.
Yusuf urged policymakers to adopt a balanced approach that integrates fiscal discipline and proactive measures to boost production and exports. “What is important is to ensure sustainability. With the right mix of fiscal and monetary policies, we can maintain this positive outlook and drive long-term economic growth,” he added.
