Naira Misses Africa’s Top 10 Currencies in May Despite FX Stability and Rising Reserves
Despite signs of improved stability in Nigeria’s foreign exchange market, the naira failed to break into Africa’s top 10 best-performing currencies in May, ranking 12th across the continent. The local currency posted a modest 0.15 per cent gain against the U.S. dollar, closing the month at N1,372/$ compared to N1,374/$ at the start, reflecting cautious but steady movement rather than a major rally.
Data compiled from African central banks showed stronger performances elsewhere on the continent, with the Zambian kwacha leading the pack, followed by the Egyptian pound and the Namibian dollar. Other currencies in the top 10 included South Africa’s rand, Botswana’s pula, Morocco’s dirham, and several Southern African currencies that benefited from stronger commodity exports and capital inflows.
A key factor supporting the naira’s relative stability was the continued rise in Nigeria’s external reserves, which increased from $48.36 billion to $49.34 billion in May. The Central Bank of Nigeria (CBN) has maintained efforts to deepen liquidity and reduce volatility in the FX market, helping to limit speculative pressure on the currency compared to previous periods of sharp fluctuations.
The improved reserve position has also coincided with renewed interest from foreign investors in Nigeria’s fixed-income market, driven by higher yields and gradual improvements in transparency within the FX system. Increased dollar inflows have helped balance supply and demand in the market, contributing to a more stable exchange-rate environment even if not strong enough to push the naira into the continent’s top tier.
Looking ahead, analysts say sustained progress will depend on stronger foreign exchange earnings, improved non-oil exports, and continued investor confidence. While the naira’s May performance fell short of Africa’s top 10, it signals a notable shift away from extreme volatility, suggesting that ongoing reforms by the Central Bank of Nigeria are beginning to deliver gradual but meaningful results.
source: The sun