Nigeria’s foreign exchange market is showing greater stability, with stronger external reserves, improved FX liquidity and monetary policy measures helping to limit pressure on the naira, according to a market assessment by Nairametrics.
The Central Bank of Nigeria’s (CBN) latest policy reset, which cut the Monetary Policy Rate (MPR) by 350 basis points from 26.5% to 23%, has so far not triggered a renewed slide in the currency. The official exchange rate has remained around N1,327-N1,330 per dollar, while the gap with the parallel market has narrowed significantly.
Nairametrics reported that the stronger position is being supported by rising external buffers, including foreign exchange reserves of more than $55 billion. The report linked the improvement to sustained inflows from the oil and gas sector, diaspora remittances and trade receipts.
The higher reserve position has provided the CBN with greater capacity to meet legitimate foreign exchange demand and counter speculative pressure, while continued use of Open Market Operations (OMO) and other liquidity-management measures has also supported conditions in the FX market.
The naira has, however, continued to experience intermittent weakness when FX turnover falls or corporate demand for dollars rises. Nairametrics noted that relatively thin market liquidity means individual corporate transactions can sometimes trigger short-term swings in the exchange rate.
At the same time, demand for naira-denominated assets remains strong, with investors continuing to participate in Treasury Bills and OMO auctions despite the reduction in the policy rate. Yields on some short-term instruments have declined following the MPR cut, but auction demand has remained substantial.
The CBN’s own data currently place the MPR at 23% and inflation at 15.39%, while the official exchange rate is around N1,329 per dollar.
Nairametrics cautioned that the outlook still carries risks, particularly if lower domestic yields reduce the attractiveness of naira assets to foreign portfolio investors or if domestic demand for dollars rises sharply. It also identified sustained crude oil production and continued FX inflows as important to maintaining the current level of currency stability.
