Nigeria’s local currency, the naira, maintained its stability in the informal foreign exchange (FX) market during Wednesday’s mid-trading session, exchanging between ₦1,615 and ₦1,618 per U.S. dollar.
This performance coincided with gains against other global currencies, signaling cautious optimism as Nigeria’s FX market undergoes what many analysts describe as a “historic shift.”
This development comes amid a surge in liquidity, with daily foreign exchange transactions now averaging half a billion dollars, a level not seen in recent history. Experts attribute this dramatic improvement in transaction volumes to sweeping reforms initiated by the Central Bank of Nigeria (CBN).
The reforms, which include a comprehensive overhaul of regulatory frameworks and the 2024 adjustment to the Electronic Form ‘M’ System (EFEMS) policy, have made the FX market more transparent and attractive to foreign investors.
“These reforms have created an enabling environment for smoother currency flow and restored some confidence in Nigeria’s forex management,” said Dr. Temitope Ajayi, a financial analyst at CardinalStone Partners. “The CBN’s efforts are beginning to bear fruit.”
Despite improvements in domestic FX liquidity, the naira’s long-term stability remains tethered to Nigeria’s dependence on crude oil exports—a sector facing increased volatility due to evolving global dynamics.
A key concern remains China’s economic trajectory, as the world’s largest oil importer grapples with slowing demand, which could potentially dampen global oil prices. While U.S. President Donald Trump’s tariff policy has thus far excluded crude oil, overall energy market sentiment remains subdued and unpredictable.
“The Nigerian naira is still vulnerable to external shocks, particularly oil price fluctuations,” noted Sarah Okonjo, an energy economist. “Until Nigeria diversifies its FX earnings, we remain at the mercy of geopolitical developments and global trade flows.”
On the international front, the U.S. dollar gained ground against major global currencies, including the euro, after President Trump postponed a planned 50% tariff on EU goods to July 9, following a conciliatory conversation with European Commission President Ursula von der Leyen.
While this move temporarily boosted investor confidence, Trump’s subsequent remarks—indicating he was “not seeking a deal”—introduced new uncertainty into global trade dynamics.
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Market sentiment remained mixed, with the Dollar Index (DXY) recording its second straight day of gains. However, the index continues to hover near the psychological support level of 99.00, with a key pivot at 98.80. A clear breakout above the 100.00 resistance is needed to confirm a sustained bullish trend for the greenback.
“The dollar’s recent gains are not guaranteed,” said Matthew Collins, a currency strategist at Saxo Bank. “The market is waiting on the Federal Reserve’s meeting minutes for direction, and until then, any rally remains fragile.”
U.S. macroeconomic data offered a mixed picture. While durable goods orders for March were revised upward to 9.2%, April saw a 6.3% decline, though better than expectations of a 9% drop. Non-transportation orders inched up by 0.2%, indicating mild underlying strength in consumer demand.
These developments added to investor uncertainty and contributed to a more cautious market stance globally, indirectly affecting emerging market currencies like the naira.
As Nigeria navigates this new FX landscape, stakeholders express a mix of optimism and vigilance. While the naira’s current stability offers a welcome respite, structural challenges remain.
“The FX reforms are timely and effective, but we need sustained oil revenues and increased non-oil exports to maintain long-term currency stability,” said Dr. Ibrahim Aremu, a lecturer in monetary policy at the University of Lagos.
For now, market participants are closely watching the Federal Reserve, oil markets, and China’s economic signals, knowing any shift could ripple into Nigeria’s recovering FX framework.
In a global economy teetering between recovery and regression, the naira’s resilience may well depend on a fragile equilibrium of domestic reforms and global economic tides.