Naira Strengthens as Dollar Supply Increases

The Nigerian naira has recorded gains against the dollar, driven by improved foreign exchange supply, boosting market confidence.

Over the past week, the naira saw a significant increase against the dollar in the parallel market, rising by three percent to reach N1,570/$1 on Friday—a gain of N50 within five days.

In contrast, the naira experienced a slight decline in the official Nigerian Foreign Exchange Market (NFEM), settling at N1,502.5 per dollar.

At the beginning of the week, the naira was valued at N1,620/$1 in the parallel market. However, as dollar availability increased, it began to strengthen. By Tuesday, its value improved to N1,610/$1 and further rose to N1,605/$1 on Wednesday. This upward momentum persisted into Thursday with a rate of N1,595/$₁ before reaching its peak performance for the week at ₦568/$_$ by Friday

In the official market, the naira demonstrated relative stability. It started at N1,499 per dollar on Monday and made small adjustments to reach N1,502 per dollar by Thursday. However, it experienced a slight dip by Friday’s close at N1,502.5 per dollar.

Analysts attribute the recent strengthening of the naira to a rise in foreign exchange inflows and strategic policy measures aimed at stabilizing the currency. The successful issuance of Nigeria’s Eurobond, coupled with domestic dollar-denominated federal government bonds, has significantly enhanced liquidity and eased pressure on the exchange rate.

Ayokunle Olubunmi, who leads Financial Institutions Ratings at Agusto & Co., emphasized how foreign exchange inflows and changes in fuel import trends impact the performance of the naira.

He stated, “The high inflow of USD due to the success of both the Eurobond and domestic FGN bond has bolstered the exchange rate. Likewise, increased domestic production of Premium Motor Spirit (PMS), Nigeria’s largest import item, has reduced FX demand somewhat. Furthermore, reforms by the CBN to streamline the FX market have contributed to stabilizing the exchange rate.”

This mix of increased dollar availability, strong foreign exchange inflows, and specific economic reforms seems to be offering crucial support for the naira’s resilience in the forex market.