For months, Nigerians have been accustomed to seeing headlines about the Naira depreciating against the US dollar. However, the tide seems to be turning, as the local currency has been making notable gains in recent weeks.
On February 27, the Naira strengthened further, trading at N1,490/$1 in the black market. This represents a significant improvement from last week’s rate of N1,565/$1. While official exchange rates are yet to be released, the positive movement has sparked discussions in financial circles about what is driving this turnaround.
What is Behind the Naira’s Recent Stability?
A combination of key policies introduced by the Central Bank of Nigeria (CBN) has contributed to the Naira’s recent improvement. These include:
- Increased Forex Liquidity: To address the dollar shortage, the CBN injected $500 million into the market in January 2024 to clear forex backlogs. In January 2025, the Federal Government took further action by clearing a $7 billion forex backlog, making it easier for businesses, multinationals, and foreign investors to repatriate funds.
- Stronger Diaspora Remittances: The CBN has introduced policies to encourage formal remittance inflows from Nigerians abroad. Initiatives such as the Non-Resident Nigerians BVN, the Non-Resident Nigerian Ordinary Accounts (NRNOA), and the Non-Resident Nigerian Investment Accounts (NRNIA) have streamlined the process, leading to increased foreign currency inflows and reducing pressure on the Naira.
- Crackdown on Speculation: The CBN has taken steps to regulate the activities of Bureau de Change (BDC) operators, limiting their ability to speculate on the dollar. Under new guidelines, BDCs can only purchase a maximum of $25,000 per week from a single authorized dealer bank. This move has reduced artificial demand and increased market transparency.
- Foreign Exchange Policy Reforms: In October 2024, the CBN implemented revised guidelines for the Nigerian foreign exchange market. These reforms consolidated all forex windows and redefined the roles of market participants to create a more transparent and efficient system.
How is the Foreign Exchange Market Performing?
Financial analyst Zeal Akaraiwe, speaking on Arise Global Business Report on February 27, 2025, noted that the CBN’s level of involvement in the forex market has reduced significantly, allowing the market to regulate itself better. He explained that the CBN now intervenes only when there is a distortion, an indication that the market is stabilizing and becoming more self-sustaining.
Measurable Impact of CBN’s Actions
The latest data shows that inflows from International Money Transfer Operators (IMTOs) increased by 63.7%, the highest level in nine months. IMTOs play a critical role in facilitating money transfers from Nigerians abroad, and the increased inflows have contributed significantly to forex market stability. Higher remittances mean stronger external reserves and a more stable economy.
Will the Naira’s Stability Continue?
The outlook remains positive. The CBN has made it clear that it is committed to maintaining stability in the foreign exchange market. With continued policy reforms, enhanced forex liquidity, and growing investor confidence, the Naira is expected to maintain its strength. However, experts advise that ongoing monitoring and strategic interventions will be essential to sustaining this progress.
What Does a Stronger Naira Mean for Nigerians?
A more stable Naira has direct benefits for everyday Nigerians, including:
- Lower Prices for Imported Goods: A stronger Naira reduces the cost of importing essential goods like food, fuel, and electronics, leading to more affordable prices for consumers.
- Cheaper Business Operations: Businesses that rely on imported materials will see reduced expenses, which could lead to lower prices for locally produced goods and services.
- Job Creation and Economic Growth: A stable exchange rate boosts investor confidence, attracting foreign investment that can lead to job creation and business expansion in Nigeria.
While the challenges in Nigeria’s economy are far from over, the recent improvements in the Naira’s performance signal a step in the right direction. With continued reforms and responsible policies, Nigerians may soon see even greater economic stability and prosperity.
