In the past week, the naira exhibited a mixed performance across different segments of the foreign exchange market, reflecting the ongoing efforts of the Central Bank of Nigeria (CBN) to stabilize the currency. Analysts have pointed out that while the CBN’s interventions have slowed due to a decline in external reserves, the currency’s performance varied greatly between the parallel and official markets. As of Thursday, the country’s foreign reserves stood at $39.09bn, a decrease that has persisted since January.
At the parallel market, the naira saw a significant improvement, strengthening to approximately 1,552/$ from 1,660/$ in the previous week. Experts attribute this positive movement to factors such as improved investor confidence and increased liquidity in the market. Aminu Gwadebe, President of the Association of Bureau De Change Operators, expressed optimism about the currency’s recent performance, noting a reduction in market panic and the role of the CBN’s foreign exchange policies in restoring confidence.
Meanwhile, at the official market, the naira continued to face pressure from demand. According to the Meristem weekly report, the naira depreciated slightly by 0.54%, moving from 1,501.61/$ to 1,509.70/$. Analysts predict that the currency will likely trade within a stable range in the coming weeks, provided there are no significant market disruptions. The interplay of supply and demand dynamics, especially in the interbank market, is expected to influence its performance moving forward.
The CBN’s efforts to clear a $7bn foreign exchange backlog were also highlighted as a key factor in recent positive developments. Governor Olayemi Cardoso announced that the backlog had been successfully cleared, easing constraints on the repatriation of funds by businesses and foreign investors. This move was seen as a vital step toward improving liquidity in the forex market and enhancing investor confidence. However, the overall impact of this clearance is yet to fully stabilize the naira, especially given Nigeria’s heavy reliance on oil imports.
Looking ahead, analysts at Comercio Partners have forecasted that the naira may face additional challenges. In their 2025 macroeconomic outlook, they project that the naira could weaken to around 1,700/$ by mid-year, citing ongoing vulnerabilities such as Nigeria’s dependence on fuel imports and limited export capacity. They emphasize that while short-term measures may offer temporary relief, sustained stability will require coordinated efforts from both fiscal and monetary authorities.
SOURCE: PUNCH