Lagos, Nigeria – February 26, 2025: The Nigerian naira has reached its highest value in the unofficial market this year, trading near N1,500 per US dollar. The rise in the naira’s strength is attributed to ongoing market reforms and interventions by the Central Bank of Nigeria (CBN).
Naira Gains Amid Strong Market Fundamentals
The naira was quoted at N1,520/$ in the black market during the early hours of Tuesday, reflecting improved investor confidence and an increase in stock market participation. This comes despite a decline in Treasury bill yields, suggesting a shift in investment preferences toward naira-denominated assets.
Market analysts believe that the recent FX sales to Bureau De Change (BDC) operators and a decrease in foreign exchange demand have helped strengthen the currency. These measures provided the much-needed push for the naira to breach the N1,500/$ level.
The naira’s recent stability follows a turbulent period where it lost nearly 70% of its value against the dollar after the government loosened foreign exchange controls in 2023. However, the CBN has since introduced several policies to stabilize the currency, including stricter regulations for BDC operators and increasing dollar supply in the official market.
CBN’s Commitment to FX Market Stability
CBN Governor Olayemi Cardoso has reiterated the bank’s commitment to maintaining stability in the foreign exchange market. He warned of severe consequences for any violations of the newly introduced Nigeria Foreign Exchange (FX) Code, emphasizing the importance of ethical practices and transparency.
“The CBN will ensure that all participants in the FX market adhere strictly to the new regulations. Any non-compliance will be met with strong repercussions,” Cardoso stated.
US Dollar Strengthens Amid Global Trade Concerns
Meanwhile, the US Dollar Index, which measures the strength of the greenback against six major currencies, climbed above 108 points. This increase is linked to uncertainties surrounding global trade and monetary policy.
Investors are closely monitoring US Federal Reserve Chair Jerome Powell’s testimony before Congress, which could offer insights into future interest rate adjustments. Additionally, US President Donald Trump’s recent announcement of a 25% tariff on all steel and aluminum imports has impacted global currency markets. The move has led to a decline in the Canadian dollar, Japanese yen, euro, and British pound.
Impact of US Tariffs on Global Markets
Trump’s trade policies have raised concerns worldwide. Canada remains one of the largest suppliers of aluminum and steel to the United States, and the new tariffs could disrupt trade relations. Japanese Prime Minister Shigeru Ishiba expressed optimism that Japan might secure exemptions from these tariffs due to its significant investments in the US economy.
On Monday, British Prime Minister Keir Starmer’s spokesperson confirmed that the UK government will continue to engage with US authorities to mitigate any adverse effects of the tariffs.
Market Outlook: Eyes on US Inflation Data and Interest Rates
As the financial markets anticipate Powell’s testimony on Tuesday, analysts are also awaiting key economic data. The January consumer price inflation report, set for release on Wednesday, is expected to show a 0.3% monthly rise in both headline and core inflation, with annual inflation projected at 2% and 3%, respectively.
The CME FedWatch Tool indicates a 90% probability that the US Federal Reserve will maintain interest rates at its upcoming March 19 meeting. However, the US 10-year bond yield has risen to 4.50% following its yearly low, signaling investor caution ahead of Powell’s speech.
Monetary Policy Committee (MPC) Optimistic About Stability
The Monetary Policy Committee (MPC) of the CBN has expressed optimism about the recent forex stability. The committee highlighted the importance of an improved external sector in maintaining exchange rate stability. It also acknowledged the positive impact of measures such as B-Match (a forex matching system) and the Nigerian Foreign Exchange Code in fostering credibility and efficiency.
The MPC believes that as monetary and fiscal policies continue to take effect, Nigeria should see an increase in Foreign Direct Investment (FDI), portfolio investments, and diaspora remittances. This is expected to further strengthen the naira and improve overall economic stability.
Future Outlook for the Naira
The Nigerian government and the CBN are keen to sustain the current momentum by implementing additional measures to boost forex inflows. Analysts predict that if the market continues to respond positively, the naira could appreciate further, providing relief to businesses and consumers affected by past exchange rate volatility.
With the latest exchange rate convergence, Nigeria moves closer to achieving a more stable and predictable forex market, which is crucial for economic growth and investor confidence.