The Nigerian naira showed its biggest sign of stability in February, despite closing the month 1.6% weaker in the official market.
In contrast, the parallel market saw a sharp appreciation of 6%, indicating improving liquidity in the retail forex segment.
The official exchange rate on the Nigerian Foreign Exchange Market (NFEM) ended the month weaker, but analysts believe the overall trend suggests growing stability.
The naira has now recorded a 2.3% year-to-date depreciation, a far cry from the extreme volatility witnessed in previous months.
Sources have informed Naijaonpoint that foreign portfolio investors are showing growing interest in Nigeria’s fixed-income market, particularly in Treasury Bills and bonds.
Boost to forex stability – Another key factor supporting the naira is the recent increase in crude oil production.
BDC allocation – A major contributor to the naira’s performance, particularly in the parallel market, is the increased liquidity driven by Bureau De Change (BDC) allocations.
Naijaonpoint previously reported that the CBN’s decision to allow BDCs to access forex directly from authorized dealers was aimed at improving price discovery and reducing speculative activities in the forex market.
While the naira’s relative stability is encouraging, some analysts warn that a stronger naira without solid economic backing could lead to another sharp depreciation, similar to what happened in March 2024.
At its February Monetary Policy Committee (MPC) meeting, the CBN opted to keep interest rates and other monetary parameters unchanged despite new data indicating persistent inflationary pressures.
While the naira’s official market depreciation of 1.6% in February suggests some weakness, its stability throughout the month—along with the sharp gains in the parallel market—indicates that Nigeria’s forex market is on a more balanced trajectory.