Nigeria’s naira continues its impressive comeback, marking its strongest performance in 13 years with a 7.5 percent gain last year, despite global economic shocks. Experts say sustaining this rally will require a combination of structural reforms, strong foreign exchange inflows, and credible monetary policy. Tilewa Adebajo, CEO of Lagos-based consultancy CFG Advisory, emphasized that a stable current account surplus, growing reserves, and controlled speculative demand are crucial to keep the currency on track.
Adebajo noted that increasing domestic oil production is essential to protect the naira from vulnerabilities tied to volatile global oil prices. “At today’s lower production levels, the naira remains highly exposed to oil prices; a meaningful, sustained drop in Brent would quickly pressure the FX regime,” he said. Despite this, the naira has already begun decoupling from oil, supported by undervaluation, rising non-oil exports, and the near collapse of petroleum product imports.
Remittances from the Nigerian diaspora are also playing a pivotal role in stabilizing the currency. With inflows approaching $25 billion and a target of $1 billion per month, these funds now provide a substantial share of foreign exchange, diversifying Nigeria’s FX sources beyond oil. Adebajo highlighted that deeper structural supply from exports, remittances, and formalized flows has contributed significantly to recent naira stability.
The expert also warned that corporates’ plans to offload dollars to avoid currency shocks could initially boost naira liquidity and appreciation, but if not managed carefully by the Central Bank of Nigeria (CBN), it could trigger broader money supply growth. Such developments could affect inflation, which recently cooled to 15.10 percent in December, the lowest in five years, thanks to revised consumer price index calculations.
Looking ahead, Adebajo suggested that while the CBN may tolerate a stronger naira, it would act to prevent disorderly appreciation by adjusting policies and rebuilding FX reserves. “A stronger naira can materially ease imported and fuel-related inflation, but inflation will only fall decisively if FX gains are paired with tight policy and better domestic supply,” he concluded. For Nigeria, the challenge is balancing a rising currency with sustainable growth, ensuring that the naira’s bull run is not just a temporary victory.
source: business day