The naira showed a mixed performance in the past week across various forex market segments, with the Central Bank of Nigeria continuing its efforts to stabilize the currency.
Analysts noted that the CBN’s forex market interventions have slowed down, coinciding with a decline in the country’s external reserves, which stood at $39.09 billion as of Thursday.
The drop in foreign reserves began in January and has continued into February.
In the parallel market, the naira gained strength, improving to around 1,552/$ from 1,660/$ in the previous week. Market players attributed this gain to a rise in investor confidence.
At the official Nigerian foreign exchange market, however, the naira continued to face significant demand pressure.
According to Meristem’s weekly report, the naira depreciated by 0.54 percent week-on-week, sliding from 1,501.61/$ to 1,509.70/$.
President of the Association of Bureau De Change Operators, Aminu Gwadebe, spoke with The PUNCH and expressed optimism about the naira’s performance, noting, “The performance of the naira was significantly positive. Naira performed positively throughout the past week from about 1660; we are now talking about 1552/$. That is significant.”
He attributed the improvement to several factors: the pickup in interbank proceeds to Bureaux de Change as directed by the CBN, which has helped inject liquidity and reduce market panic, as well as the Chinese holiday, which likely reduced demand.
Additionally, the FX Code has introduced discipline and monitoring, while investor confidence has risen.
“The market, especially the interbank, is awash with portfolio inflows. Also, there is no negative perception. All along, we have been battling with a negative perception, with confidence in even the management of the Central Bank, but they have been able to put some confidence in them now, especially since they have cleared the $7bn (FX) backlog, and the impact of the policy is making the CBN put their foot on the ground to ensure the reforms continue to give positive reports. They are doing a lot of forward guidance so that they can communicate with investors, operators, and other stakeholders. I think that approach has been giving a lot of people hope that the CBN has resolved to engage with stakeholders and work with them,” Gwadebe said.
Analysts at Cowry Assets Management Limited projected that the naira would likely remain relatively stable in the coming week, barring any significant market disruptions.
“Market dynamics will continue to shape the supply and demand for the dollar, influencing the local currency’s performance across various exchange segments,” they noted.
The recent appreciation of the naira is attributed to several factors, including the clearance of the $7bn foreign exchange backlog and improved market liquidity.
Governor of the CBN, Olayemi Cardoso, recently announced that the Federal Government had successfully cleared the $7bn forex backlog, following a verification process by forensic auditors.
At the launch of Nigeria’s Regulatory Policy Framework, Cardoso expressed optimism that clearing the backlog would ease the repatriation process for businesses, multinationals, and foreign investors.
He stated, “In addressing foreign exchange liquidity constraints, decisive steps have been taken to clear the outstanding $7bn forex backlog to ensure that businesses, multinationals, corporations, and foreign investors can repatriate funds seamlessly.”
However, Comercio Partners, an investment company, has forecasted that the naira could weaken to around 1,700/$ by mid-2025.
In their 2025 macroeconomic outlook, the company highlighted that Nigeria’s reliance on fuel imports continues to put pressure on the naira, with limited dollar inflows from exports exacerbating the currency’s instability.
They also noted that fiscal policy often fails to align with monetary efforts, undermining effective economic management.
“While Eurobond issuances provide temporary relief to Nigeria’s exchange rate challenges, their impact is fleeting in the absence of structural economic reforms. The CBN’s interventions, including EFEMS and rate adjustments, demonstrate the potential for short-term stabilisation but fall short of addressing the naira’s underlying vulnerabilities. As Nigeria moves into 2025, the combination of reduced fuel imports, improved investor confidence, and high-yield investment opportunities creates a pathway for stability. We project that the naira will close the first half of 2025 (at) N1,700-N1800 per dollar. However, only a holistic, coordinated effort between monetary and fiscal authorities can ensure sustained currency appreciation and broader economic resilience in the years ahead,” Comercio Partners stated.
