Naira Strengthens as CBN Reforms Boost Confidence, Cut Speculation in FX Market
Nigeria’s naira is making one of its strongest comebacks in recent years, lifted by decisive Central Bank of Nigeria (CBN) reforms, a surge in foreign reserves, and a sharp decline in speculative trading. After months of volatility and widening exchange rate gaps, the local currency is now stabilizing across both official and parallel markets. The naira currently trades around ₦1,460/$ at the parallel market and ₦1,475/$ at the official window, its best performance in 2025, signaling renewed market alignment and investor confidence.
At the heart of this turnaround is CBN Governor Olayemi Cardoso’s aggressive reform agenda, launched after he took office in October 2023. His policies, ranging from clearing over $7 billion in FX backlogs to unifying exchange rates and introducing the Foreign Exchange Code (FX Code), have restored transparency and discipline in the market. The CBN has also rolled out the Electronic Foreign Exchange Matching System (EFEMS), a digital platform that provides real-time currency data to curb manipulation and speculation. Together, these measures have injected liquidity and reduced the distortions that once fueled currency depreciation.
Nigeria’s external reserves have risen to $43.05 billion, up from $40.51 billion just two months earlier, providing an import cover of over eight months, well above international standards. This strengthening reserve base has boosted foreign investor confidence, drawing back Foreign Portfolio Investors (FPIs) and International Oil Companies. Analysts at Commercio Partners credit the rally to “stronger fundamentals, reduced speculative trading, and improved external buffers,” noting that this recovery is more sustainable than previous short-lived rallies. The CBN’s policies have also attracted diaspora funds, with new Non-Resident Nigerian Accounts allowing smoother remittances and investment flows.
For many FX traders, the landscape has changed dramatically. Speculators, once thriving on wide rate disparities, are now counting losses as the gap narrows. “Some Bureau de Change operators have sold dollars below their purchasing price,” said Lagos-based trader Garuba Sarki, reflecting a market now less tolerant of manipulation. CBN’s crackdown on unethical practices, coupled with the FX Code’s six guiding principles, ethics, governance, execution, information sharing, risk management, and compliance—has effectively ended what Governor Cardoso calls “the era of opaque practices.”
However, sustaining this momentum will demand continued discipline. Economists warn that Nigeria must maintain fiscal restraint, boost crude oil output, and diversify export earnings to prevent a relapse. Still, with speculation declining, reserves rising, and reforms deepening, the naira is regaining its strength and credibility. As Governor Cardoso stated at the CBN’s last Monetary Policy Committee meeting, “Unification has enabled us to clear outstanding obligations, giving businesses the confidence to plan and invest for the future.” For now, the naira’s rebound stands as a symbol of Nigeria’s renewed economic resilience and a turning point for its financial future.
source: punch