Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

At the official foreign exchange (FX) market, the naira rose to a two-month high of N1,565.46 per dollar on Wednesday, continuing the trend of relative stability that has persisted in previous months.

According to data released by the Central Bank of Nigeria (CBN), the last time the local currency traded close to this level was on 4 April 2024, when the dollar traded at N1,567.02 on the Nigerian Foreign Exchange Market (NFEM).

The naira was worth N13.82 more than the dollar by the end of Wednesday's trading session, trading at N1,565.46. Compared to the N1,579.28 reported on Tuesday in the official FX window, this indicates a 0.9% gain.

Additionally, the naira saw advances in the black market, which is the parallel market segment. In comparison to Monday and Tuesday, when it was valued at N1,610, the local currency appreciated by N5 to settle at N1,605 per dollar.

The CBN's governor, Olayemi Cardoso, claims that the apex bank's systematic and purposeful reform initiatives are responsible for the naira's increased degree of stability.

One of the biggest shifts in Nigeria's foreign exchange situation in recent times, he noted, was the near-complete elimination of the difference between the official and alternative exchange rates.

This development was attributed by Cardoso to the Federal Government's steadfast commitment to reform and the growing clarity of policy direction.

“Thanks to our sustained reforms and enhanced policy transparency, the naira has stabilised at a far more sustainable level relative to the U.S. dollar. For the first time in years, the disparity between the official and parallel market rates has virtually disappeared, and speculative arbitrage opportunities have been drastically reduced,” Cardoso stated.

He added that these reforms have effectively reduced distortions in the FX market.

The CBN Governor further emphasised that a key factor in restoring investor confidence had been the return of relative currency stability.

He pointed out that it has consequently prompted an increase in independent foreign exchange inflows via formal channels, contributing to Nigeria's diversification of foreign exchange sources away from its long-standing reliance on oil.

Cardoso also highlighted Nigeria's growing external reserves, which are a crucial sign of the country's economic stability.

“Our foreign exchange reserves have now risen to over $38 billion, giving us close to 10 months of import coverage. This provides the country with a more robust buffer to withstand external shocks such as falling oil prices or global market volatility, thereby protecting the economy,” he explained.

Analysts at FSDH Merchant Bank Limited's research section, meanwhile, advised the CBN to continue taking the initiative in overseeing the foreign exchange market. They emphasised how crucial it is to continue with measures that increase market liquidity and investor trust.

However, the analysts cautioned that monetary policies by themselves won't be enough to provide sustained economic stability.

They said in their most recent economic assessment that, in order to fight inflation, advance macroeconomic balance, and guarantee the sustainability of growth, structural changes and improved budgetary restraint would also be essential.

Legit.ng reported that the naira has remained stable across different markets, helped by a recent $190 million intervention by the Central Bank of Nigeria (CBN).

Experts say this stability is encouraging investors and building trust in the Nigerian economy.

Even though there have been challenges both locally and globally, the naira has shown steady performance in recent months.

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Source: Legit.ng