The liberalisation of Nigeria’s foreign exchange (forex) market has restored investor confidence and stabilised the exchange rate, addressing long-standing volatility caused by dollar shortages and a slump in crude oil revenue. Prior to the reforms introduced in June 2023, the Central Bank of Nigeria (CBN) struggled to meet forex obligations, leading to a backlog of over $7 billion. This severely impacted businesses, with many manufacturers unable to secure raw materials and foreign companies unable to repatriate profits, prompting some to exit the country.
The new “willing buyer, willing seller” model has significantly improved forex access for investors and businesses. The backlog of forex obligations has been cleared, and manufacturers are now able to fund their operations with ease. The naira has also shown signs of strength, appreciating slightly from N1,609/$ to N1,590.75/$ in the official market. The narrowing gap between official and black market exchange rates has reduced roundtripping and increased transparency.
Investor confidence is further reflected in financial indicators. Nigeria’s eurobond yields have dropped to their lowest since issuance, and domestic debt auctions have seen high demand, indicating optimism in the local market. Analysts credit these improvements to the CBN’s reforms and strategic forex interventions, including a recent $190.4 million injection. Experts note that while the naira has depreciated, it has done so in a more stable and predictable manner—reducing one of the key risks for foreign investors.
External reserves have begun to rebound, standing at $38.9 billion as of mid-May, enough to cover over seven months of imports. This recovery has been bolstered by international endorsements, including Fitch Ratings upgrading Nigeria’s credit outlook. These reforms have not only helped in cushioning Nigeria from global economic uncertainties but also enhanced the country’s attractiveness to foreign capital. Efforts to improve transparency and consistent monetary policy are key to sustaining this momentum.
While challenges remain—particularly inflation, structural inefficiencies, and policy implementation—analysts believe the country is beginning to emerge from the most difficult phase of its economic reform. With continued focus on exchange rate stability, institutional reforms, and economic diversification, Nigeria is poised to transform short-term improvements into long-term economic resilience. Experts stress that investment and confidence, rather than just revenue, will be critical in determining the sustainability of these gains.
Source: Punch