The naira has shown significant appreciation, reaching N1,515 per dollar on the parallel market, driven by the Central Bank of Nigeria’s (CBN) new forex trading platform and increased investor confidence. In the official market, the naira recorded a 2.08% gain, closing at N1,535 per dollar last Friday, compared to the previous day’s N1,567, according to CBN data.
Despite this progress, analysts predict the naira may not rise beyond N1,500 per dollar. Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), stated, “It is achievable considering the enhanced investor confidence, but I want to believe further appreciation levels may not go beyond N1,500/$.”
Key Drivers of Naira’s Strength
The recent strengthening of the naira is attributed to a combination of market reforms, increased foreign exchange inflows, and improved crude oil and gas output. According to 9am News, diaspora remittances have surged to approximately $600 million monthly, contributing significantly to the naira’s rebound.
The adoption of the Bloomberg BMatch system for forex trading, operational since December 2, 2024, has enhanced transparency and accountability in Nigeria’s forex market. Gwadabe noted that this platform has created a stable and predictable market environment, bolstering investor confidence.
Additionally, rising foreign reserves, which recently hit the $40 billion mark, have increased the CBN’s capacity to stabilize the naira. This improvement has also been supported by the government’s issuance of a $2 billion eurobond, which has further elevated investor trust.
Economic Implications
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), described the naira’s appreciation as a welcome development. “This strengthening addresses one of the biggest drivers of inflation and the high cost of doing business in Nigeria. It is a relief for individuals and corporates,” he stated.
Yusuf emphasized that fiscal and monetary policy alignment is crucial for sustaining the naira’s stability. He warned against unchecked government spending and fiscal deficits, which could pressure the naira. Supporting local manufacturing, reducing reliance on imports, and boosting exports are also critical to sustaining the currency’s value, he added.
While analysts remain optimistic about the naira’s short-term performance, they stress the importance of maintaining policy discipline to preserve this progress. With continued reforms, rising forex inflows, and strategic investments, Nigeria is poised to achieve long-term currency stability.
According to 9am News, this period of naira strengthening marks a positive shift in Nigeria’s economic trajectory, underscoring the impact of coordinated policy efforts on the nation’s financial stability.
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