The Nigerian naira has recorded a significant gain against the US dollar, driven by improved liquidity in the foreign exchange market. According to data from the Central Bank of Nigeria, the naira rose by 0.72 percent to close at 1,455.17/$ at the official market last week, representing a gain of N10.5. This upward trend was also observed at the parallel market, where the naira strengthened by 0.88 percent to 1,475/$.
The recent surge in the naira’s value is attributed to strong foreign inflows, particularly from foreign portfolio investors seeking to meet local fixed-income obligations. The forex market initially experienced a dip due to the exit of foreign portfolio investors, but the midweek influx of foreign funds helped to stabilize the market. Improved US dollar supply and external reserves also contributed to the naira’s stability.
The external reserves increased to $42.57 billion, driven by higher inflows from oil sales, remittances, and portfolio investments. This development is expected to support the naira’s stability in the near term, according to analysts. However, factors such as rising import demand or weaker dollar inflows could potentially slow further gains.
The recent performance of the naira is a notable development, given that it marks the strongest gain for the currency since December 2024. The improvement in the forex market is also reflected in the Purchasing Managers’ Index, which soared to 54.0 in September, according to the Central Bank of Nigeria.
In a review of the FX market, Cowry Assets Management Limited noted that the naira’s improvement was driven by better foreign exchange inflows, which reduced pressure on demand. The company expects the naira to remain stable in the near term, supported by steady FX inflows and Central Bank interventions. However, the potential impact of global oil market volatility on investor sentiment and Nigeria’s external earnings remains a factor to be watched.
The stability of the naira is crucial for Nigeria’s economy, given its reliance on imports and foreign investment. As the country navigates the complexities of the global economy, the performance of the naira will be closely monitored by investors, policymakers, and stakeholders.