The Nigerian naira recorded its third consecutive day of appreciation against the US dollar on Wednesday, closing at ₦1,583 per dollar in the official foreign exchange window. This marks a modest improvement from Tuesday’s closing rate of ₦1,588.5/$1 and reflects growing optimism around Nigeria’s monetary policy direction. The data, released by the Central Bank of Nigeria (CBN), suggests a strengthening trajectory for the currency, which opened the week at ₦1,597/$1 on Monday.
Steady Intraday Performance
Intraday figures showed the naira fluctuated between a high of ₦1,590/$1 and a low of ₦1,582.5/$1 before settling at an average rate of ₦1,584.25/$1. In broader cross-currency activity, the local currency traded at ₦2,126.23 to the British pound and ₦1,795.07 to the euro at the official market. These figures underscore moderate stability, especially compared to the more volatile performance observed in early 2024.
Parallel Market Holds Steady
In the parallel market, the naira maintained stability, closing at ₦1,625 per dollar—the same level as recorded on Tuesday. Market sources in Lagos indicated that the rate has remained consistent throughout the week, having stood at ₦1,627/$1 on Monday. Against other major currencies, the naira traded at ₦2,155/£1 on Wednesday, inching upward from ₦2,145/£1 on Tuesday and ₦2,142/£1 on Monday. It also recorded a slight gain against the euro, trading at ₦1,820/€1 on Monday and Wednesday, and ₦1,825/€1 on Tuesday.
Foreign Reserves Rise Again
In a parallel development supporting the naira’s stability, Nigeria’s external reserves grew to $38.53 billion on Tuesday, up from $38.50 billion the previous day. According to the CBN, this increase reflects growing investor confidence and a return of previously hesitant market participants—trends that have played a pivotal role in stabilizing the currency, which now trades within the ₦1,590 to ₦1,610 range.
CBN Governor Olayemi Cardoso, speaking after the latest Monetary Policy Committee (MPC) meeting, pointed to ongoing monetary reforms as key drivers of this positive shift. He noted that rising reserves and reduced pressure on the foreign exchange market stem from these reforms, particularly those aimed at improving transparency, simplifying FX access, and encouraging capital inflows.
A Rollercoaster of Reserve Movements
Nigeria’s foreign reserves started the year on a strong note, climbing above the $40 billion threshold in January and peaking at $40.15 billion on January 20. However, by mid-February, reserves had dipped to $38.82 billion—a monthly drop of over $1.3 billion—largely due to declining global oil prices, increasing external debt obligations, and heightened demand for dollars.
This downward trend persisted into March, with the reserves falling to $38.35 billion on March 7 and slipping further to $38.31 billion by March 28. Within just 21 days, Nigeria lost approximately $510 million in reserves. April’s performance saw the reserves stay below $38 billion, fluctuating between $37.79 billion and $38.08 billion throughout the month.
Encouragingly, May ushered in a recovery. The reserves rose steadily, reaching $38.12 billion by May 9, $38.21 billion on May 12, and $38.38 billion by May 16—amounting to a gain of $260 million in one week. The current level of $38.53 billion represents continued momentum and a potential turning point.
Net Reserves Surge, Signaling Deeper Reform Impact
Governor Cardoso also revealed a dramatic rise in Nigeria’s net external reserves—the actual usable foreign assets excluding encumbered or pledged funds. According to him, these net reserves have surged from just above $3 billion to nearly $23 billion, which he described as a “quantum leap.” He attributed this jump to improved reserve accounting, increased market confidence, and renewed participation from institutional investors and portfolio managers.
This surge also reflects the effects of comprehensive FX reforms, including efforts to unify exchange rates, eliminate backlogs, and ensure timely settlement of forward contracts. The reforms appear to be restoring faith in Nigeria’s macroeconomic framework after years of uncertainty.
World Bank Acknowledges Positive Outlook
Corroborating the central bank’s stance, the World Bank, in its recent Nigeria Development Update (NDU) titled “Building Momentum for Inclusive Growth,” stated that the country’s macroeconomic indicators are showing signs of improvement. The report credited the government’s fiscal and monetary reforms for reinvigorating economic activity and helping to stabilize the foreign exchange market.
According to the World Bank, sustained reforms—such as fuel subsidy removal, exchange rate liberalization, and efforts to expand the tax base—have begun to enhance revenue mobilization and improve investor sentiment. These reforms, though initially painful for consumers and businesses, are now yielding results in terms of increased capital inflows, foreign direct investment interest, and greater confidence in the naira.
What Lies Ahead
The naira’s recent appreciation, coupled with growing foreign reserves and international endorsements, suggests that Nigeria may be entering a new phase of economic stabilization. However, this momentum will require sustained effort. Analysts warn that without continued fiscal discipline, proactive monetary management, and consistent reform execution, gains could easily be reversed.
Moreover, global economic uncertainties—including oil price volatility, potential interest rate hikes by major central banks, and geopolitical tensions—remain critical external risk factors. Internally, addressing inflationary pressures, boosting local production, and ensuring inclusive economic growth will remain top priorities for the Central Bank and fiscal authorities.
In conclusion, the naira’s performance this week offers a hopeful sign for the Nigerian economy. It reflects a fragile but growing stability built on transparent policy shifts and reform-backed investor confidence. If sustained, these gains could help reposition Nigeria’s financial landscape and foster a more resilient and dynamic economy.
