The naira showed renewed strength at both the official and parallel markets at the start of the week, buoyed by a combination of internal and external factors.
Analysts say the rebound, from a low of 1,635/$ to about 1,615/$ in the parallel market, reflects improving investor sentiment, sustained interventions by the Central Bank of Nigeria and a global easing of trade tensions following the pausing of U.S. tariffs.
Crude oil price recovery, increased diaspora remittances, and enhanced transparency from the CBN have also contributed to the modest currency appreciation, though experts warn that sustaining the trend will require consistent oil production, improved capital inflows, and deeper policy coordination.
The president of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadebe, in a chat with The PUNCH, linked the strengthening of the naira to a combination of factors.
The renewed naira strength in both the official and the parallel markets from a low of N1635/$ to a positive level of N1615/$ at the close of business (Monday) in the parallel market can be linked to combinations of many factors internally and externally. The sustained CBN intervention in the NFEM has boosted liquidity supplies, helped in stemming the volatility and enhanced investors’ confidence. The continuation of crude oil sales in naira to local refineries has also doused the escalated demand pressure on the naira during the period of volatility, which has created tension in the market.
“Similarly, the revision and suspension of the USA tariffs on major trading partners have lessened the panic and chaos associated with earlier announcements as both global and local markets have responded positively with considerable appreciation. Intuitively, the transparency of the CBN in data communication, like the increase in net foreign exchange position of over $6bn, has continued to give market clarity and boost our buffers.
The increase in diaspora remittances of over nine per cent to $20.98b also underscored the resilience of the CBN measures on diversifying our sources of foreign exchange and a paradigm shift from demand measures to supply measures,” the president of the Association of Bureau De Change Operators of Nigeria, Lawan Gwadebe, explained.
Despite the positive trend, Gwadebe said that things were not yet smooth sailing and called for increased collaboration between the “fiscal and monetary authorities to continue to align together and collaborate with relevant stakeholders for sustainability. It is important to uphold the humane policies and reforms of the present President Tinubu administration to rein in inflation and economic and security challenges.”
The Chief Executive Officer of Arthur Stevens Assets Management Limited, Tunde Amolegbe, said, “Oil prices have risen to like $65. There’s a correlation between crude oil prices and our exchange rate. I have a feeling that the movement in crude oil prices has impacted traders’ opinions regarding our exchange rates. That’s one side. The second side, of course, will also be the number one issue globally right now, which is the issue of US tariffs on other countries.
“It appears to me that the consensus amongst analysts is that the impact on us as a country might be muted, very limited. The impact appears to me to be indirect, more than anything. Our exports in terms of finished goods to the US are very limited. You know, our primary export is oil. So, it will appear to me that the market had overreacted to the US tariffs and might be trying to correct itself. You know the parallel market has always been a lot more price sensitive than the official market. It is also prone to overreaction, simply because it is more price sensitive than the other market. So it is very possible that it overreacted on the back of the initial announcement, and now we are seeing some level of correction happening.”
Meanwhile, the Head of Agusto Consulting, Jimi Ogbobine, posited that increased crude oil production is key to stabilising the naira.
He explained, “FX supply largely comes from oil sales and how much we are able to push out at that level. If we can maintain between 1.5 and 1.6 million barrels per day, then we can keep the naira stable between the 1500 and 1600/$ region, but if oil production drops below that range, that is also trouble for us.
“The second important issue is how we are able to stimulate foreign direct investment. The CBN data that just came out on capital accounts indicates that we are still a bit weak in terms of foreign direct investment. However, some cheery news has come out, a rating action by Fitch, which is also helpful to us.”