At the close of trading on Wednesday, the naira recorded a modest appreciation of 0.16 percent, strengthening to ₦1,530.52/$ from the previous session’s rate of ₦1,532.93/$, according to data from the Central Bank of Nigeria.
The CBN’s report also indicated that the highest exchange rate recorded during the session was ₦1,545/$, while the lowest was ₦1,500/$, a reduction compared to the preceding day’s figures.
In the parallel market, however, the naira remained steady at ₦1,585/$, as observed by CardinalStone Research.
This consistency widened the margin for speculative trading, with the gap between the official and parallel market rates narrowing to 3.07 percent, down from 3.40 percent at the start of the week.
Despite slight fluctuations, analysts believe the market is stabilizing, driven by structural reforms and increased foreign exchange inflows.
Market Evolution and Changing Dynamics
CEO of CFG Advisory, Tilewa Adebajo, shared her insights on the evolving forex market, stating, “We really need to change our mindset about the exchange rate. The reason we are seeing some stability is because there is a new system where everyone uses one portal to buy and sell their dollars or whatever currency.
Most of the people abroad now use an app when they want to transfer money to Nigeria. When they use the app, it gives them their official rate, does the transfer through that system, and the settlement is done.
” I think people are not getting used to the fact that the system has changed in a positive manner. Our so-called parallel market operators are the ones who have not yet caught on to this. A lot of the overseas inflow is coming in through that platform. So, there is supply in the market. What is left now is for the parallel market operators and the Bureau De Change to also adopt that method. When that is done, we are moving into what is called price discovery. CBN is not the major supplier of dollars to the market any longer, and that is good. Our foreign exchange system has evolved, and a lot of people have not yet understood that evolution.”
Similarly, Comercio Partners, in their investor note, commended the naira’s recent stability, noting, “The naira’s relative stability deserves some credit here – holding steady in the ₦1,450-₦1,550 range against the dollar, putting a leash on import costs that were previously spiraling out of control.”
While acknowledging these gains, Comercio cautioned that the sustainability of the naira’s stability will depend on consistent policies and steady forex inflows.
“Nigeria’s long-term stability hinges entirely on sustained forex inflows, competitive market dynamics (read: breaking up monopolies), and the Central Bank keeping its eye on the ball. One policy misstep and we’re right back to square one.”
Crude Oil Prices and FX Stability
Echoing similar sentiments, CardinalStone analysts emphasized the role of foreign inflows and Nigeria’s positive current account position in maintaining currency stability.
However, they also flagged a key risk factor, the potential decline in global crude oil prices, which could affect the country’s forex reserves and trigger inflationary pressures.
So far, Brent crude prices have dropped by 5.5 percent year-to-date, influenced by growing global supply, policy shifts, and weakening demand.
Additionally, the United States’ push for increased oil production has led the Energy Information Administration to revise its 2025 crude production forecast to 13.61 million barrels per day (mbpd), up from the previous estimate of 13.55 mbpd and the 2024 average of 13.22 mbpd.
Meanwhile, OPEC+ has reaffirmed its December 2024 decision to begin unwinding 2.20 mbpd in voluntary production cuts starting April 1, 2025. This move could further expand supply and exert downward pressure on oil prices.
With these global market shifts, analysts warn that Nigeria’s foreign exchange stability remains susceptible to external shocks, emphasizing the need for strategic policy measures to cushion potential impacts.
