At the close of trading on Wednesday, the Nigerian naira showed a modest appreciation of 0.16%, rising to 1530.52/$ from the previous session’s 1532.93/$, according to data from the Central Bank of Nigeria (CBN). This indicates a slight improvement in the currency’s value, though fluctuations continued within the day’s trading range, with the naira reaching as high as 1545/$ and dipping to a low of 1500/$.......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
The movement in the official forex market came amidst growing concerns over the widening gap between the official and parallel market rates. Despite the official market’s fluctuations, the parallel market saw little change, with rates remaining steady at 1,585.00/$, according to CardinalStone Research. This left the spread between the official and parallel market rates at around 3.07%, slightly narrower than the 3.40% observed at the start of the week.
While this slight depreciation in the naira’s value may have raised concerns, analysts suggest that the market is stabilizing thanks to ongoing structural reforms and increased forex inflows. These developments are credited with reducing volatility in the foreign exchange market, offering a more predictable environment for businesses and investors.
Tilewa Adebajo, the Chief Executive Officer of CFG Advisory, shared her insights with The PUNCH, emphasizing the shift in Nigeria’s forex system. She stated, “We really need to change our mindset about the exchange rate. The reason we are seeing some stability is because there is a new system where everyone uses one portal to buy and sell their dollars or whatever currency.” According to Adebajo, the new platform has helped streamline forex transactions, particularly for overseas inflows, which are increasingly processed through apps providing the official exchange rate.
Adebajo continued, “I think people are not getting used to the fact that the system has changed in a positive manner. Our so-called parallel market operators are the ones who have not yet caught on to this.” She further explained that as more foreign exchange flows through this new system, the parallel market will eventually need to adapt, ensuring greater price discovery and less reliance on the Central Bank of Nigeria as the primary dollar supplier.
In an investor note, Comercio Partners also praised the recent stability of the naira, pointing out that the currency had remained largely within the N1,450-1,550/$ range, helping to stabilize import costs that had previously been escalating. However, the firm cautioned that this stability hinges on the continued consistency of government policies and ongoing foreign exchange inflows.
Echoing similar sentiments, experts from CardinalStone Research observed that the naira’s relatively stable performance this year has been supported by increased forex inflows, improved CBN efforts, and a positive current account position. They noted, however, that global oil price fluctuations pose a significant risk to Nigeria’s forex market stability. “The outlook faces a key risk from the expectation of weaker global crude oil prices, which could impact Nigeria’s FX stability and stoke some inflationary worries,” they warned.
Brent crude oil prices have fallen by 5.5% year-to-date, driven by expectations of rising global supply and shifting policies. The U.S. is increasing its oil production, leading to a revised forecast for 2025, while OPEC+ has agreed to gradually unwind production cuts starting in April 2025.
