Naira at ₦1,360/$: Can the currency’s new stability last?

The Nigerian naira has shown signs of renewed stability around the ₦1,360-to-the-dollar level, offering a measure of relief to businesses, investors and consumers after years of sharp foreign exchange volatility.

The recent calm has raised hopes that the currency may have found a more sustainable trading range. But analysts caution that a stronger naira will depend on whether Nigeria can address the underlying supply and demand pressures in the foreign exchange market.

The Central Bank of Nigeria (CBN) has played a major role in supporting the recent stability through foreign exchange market interventions and tighter monetary conditions.

The apex bank’s efforts to improve dollar liquidity have helped ease some pressure on the official foreign exchange market, giving importers and other legitimate users better access to foreign currency.

Higher interest rates have also been used to make naira-denominated assets more attractive to investors and discourage excessive speculation against the currency.

Despite the relative calm in the official market, the gap between official and parallel-market rates remains a concern for policymakers.

Currency traders in the informal market continue to quote rates that can differ from official rates, reflecting differences in dollar availability, retail demand and other market pressures.

Analysts say a persistent gap between the two markets could encourage arbitrage and speculative activity, potentially undermining efforts to establish a unified and transparent foreign exchange market.

For businesses that rely heavily on imported raw materials, machinery and finished goods, however, any sustained improvement in exchange-rate stability could provide greater certainty for pricing and financial planning.

The bigger question is whether the naira can maintain its current level without prolonged dependence on central bank interventions.

Analysts point to the country’s ability to generate foreign exchange through exports as a critical factor. Higher crude oil production and stronger non-oil exports could increase dollar inflows and strengthen the country’s external reserves.

Foreign investment will also remain important. Sustainable foreign direct investment would provide a more reliable source of external capital than short-term portfolio flows, which can leave quickly when market conditions change.

At the same time, fiscal and monetary policies will need to work together to tackle inflation, improve productivity and reduce structural pressures on the currency.

The naira’s movement around ₦1,360 per dollar represents a significant improvement in market stability if sustained, but analysts warn against interpreting short-term calm as a complete recovery.

For the improvement to translate into lasting economic gains, businesses and households would need to see greater predictability in the exchange rate, lower imported costs and improved purchasing power.

Ultimately, the durability of the naira’s recovery will depend less on occasional market interventions and more on Nigeria’s ability to generate sufficient foreign exchange through exports, attract long-term investment and maintain credible economic policies.

For now, the ₦1,360 level offers a welcome respite. Whether it becomes a genuine turning point for the naira, however, will be determined by what happens after the interventions fade.