Naira Holds Steady Amid $190 Million Boost and Growing Investor Optimism

Despite facing global and local economic headwinds, Nigeria’s naira continues to show remarkable stability, buoyed by strategic reforms and recent foreign exchange (FX) interventions by the Central Bank of Nigeria (CBN).

FX Market Reforms Strengthen Confidence

The CBN’s ongoing FX market reforms have significantly improved market transparency and operational efficiency. As a result, the naira has experienced reduced volatility, and fluctuations in the exchange rate have moderated notably compared to 2024.

Following the recent $190.4 million injection into the FX market, analysts anticipate short-term stability for the naira. These reforms have also helped narrow the gap between official and parallel market rates — with the naira trading around ₦1,598/$1 officially and ₦1,605/$1 in the parallel market — indicating improved investor confidence and more orderly currency movements.

A Resilient Start to 2025

The naira began 2025 on a strong note but faced pressure in the first quarter. However, ongoing reforms, better liquidity, and FX market unification have since helped restore stability. Compared to its performance in 2024, the local currency has shown resilience, even amid global trade tensions and currency depreciation in other emerging markets.

In a note to investors, Dr. Ifeanyi Uba, Head of Research at Commercio Partners, emphasized that Nigeria’s currency is faring better than many peers, thanks to a more predictable FX environment. "While the naira has depreciated, it has done so in a more controlled and less volatile manner — a key factor for foreign investors," he said.

Structural Reforms Drive Renewed Interest

According to CBN Governor Olayemi Cardoso, the reforms aim to stabilize the currency, curb inflation, and restore macroeconomic stability. Since assuming office in late 2023, Cardoso has focused on strengthening monetary policy tools, rebuilding foreign reserves, and creating a more conducive environment for businesses and investors.

Recent gains include a narrowing of the official and parallel market exchange rates, improved foreign capital inflows, and a significant decline in Nigeria’s sovereign risk spread — now at its lowest since January 2020.

East Capital portfolio manager Emre Akcakmak noted that, “Nigeria is clearly back on the radar. The improved currency liquidity, profit repatriation options, and a more stable naira are attracting investors.”

Standard Chartered’s Head of Africa Strategy, Samir Gadio, echoed this view, highlighting the impact of FX market reforms and high-yield OMO bills in boosting portfolio inflows.

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Strengthening Reserves and Market Outlook

External reserves have started to rebound, reaching approximately $38.9 billion as of mid-May — enough to cover over seven months of import obligations. The reserve build-up reflects reduced FX pressure and renewed investor confidence, amplified by Fitch Ratings' upgrade of Nigeria’s credit rating from ‘B-’ to ‘B’ with a stable outlook.

CBN’s clearance of the $7 billion FX backlog and reintroduction of OMO bills at market-reflective rates have also contributed to this turnaround.

Ike Chioke, MD of Afrinvest West Africa, noted that the successful issuance of $2.2 billion in Eurobonds has further strengthened Nigeria’s FX position, predicting continued gains for the naira if current policies persist.

Challenges Remain, but Outlook Brightens

Despite notable progress, challenges such as inflation, structural inefficiencies, and policy execution risks remain. Cardoso has acknowledged these, reiterating the need for disciplined policy, economic diversification, and inflation control to build stronger buffers against external shocks.

Financial Derivatives Company’s MD, Bismarck Rewane, said Nigeria is emerging from the toughest phase of its economic reform cycle. While acknowledging that policy sequencing and implementation have been inconsistent, he remains optimistic about the naira’s fundamentals, stating that effective management of the FX system is critical to long-term stability.

He stressed that "investment — not just revenue — is key to unlocking growth," and called for urgent reforms in energy and oil sector transparency to sustain the positive momentum.

Nigeria’s journey through economic reform is gaining global recognition. With improved FX transparency, rising reserves, narrowing exchange rate gaps, and foreign investor confidence rebounding, the foundation for a more stable and sustainable naira is being laid. While challenges persist, Nigeria is proving that strategic reform and focused leadership can turn adversity into opportunity — and the world is beginning to take notice.

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Daily Trust