Nigeria’s currency is showing early signs of stabilisation against the British pound, supported by ongoing reforms of the Central Bank of Nigeria (CBN) and improving macroeconomic fundamentals.
The naira closed at N1,837/£1 at the official market on Wednesday, holding below the key psychological threshold of N1,900/£—a level analysts say has strengthened bullish sentiment around the local currency.
Market indicators suggest the naira has retained much of its gains against the pound this year, following a period of heightened volatility.
Reforms, reserves underpin stability
The relative stability is largely attributed to policy tightening and structural reforms introduced under the CBN Governor, Olayemi Cardoso.
These measures include:
- Sustained high interest rates to curb inflation
- Improved foreign exchange liquidity
- Reduction in fiscal dominance through cuts in Ways and Means financing
- Strengthening of external reserves
Nigeria’s foreign reserves have climbed to record levels, while diaspora remittances have risen significantly—estimated at $600 million monthly.
In addition, the recapitalisation of the banking sector has seen lenders raise over N4.6 trillion, helping to absorb excess liquidity that previously pressured the naira.
The premium between the official and parallel markets has also narrowed to below 2 per cent, signalling improved market efficiency.
Technical signals favour naira strength
From a technical standpoint, the naira continues to trade below its 200-day moving average of N1,915/£, indicating that the longer-term trend remains supportive of further appreciation.
Key market levels show:
- Resistance zone: N1,860/£ – N1,875/£
- Critical support: N1,805/£ – N1,807/£
- Upside risk trigger: Break above N1,900/£
- Next appreciation target: N1,790/£
Although the pound has rebounded slightly from its recent low of N1,804/£ (March 18), analysts say the earlier sell-off may be losing momentum.
Interest rate dynamics shape outlook
The CBN’s tight monetary stance has been central to stabilising the currency. The Monetary Policy Rate (MPR), though recently eased, remains elevated at 26.5 per cent.
In contrast, the Bank of England has maintained a relatively hawkish posture, holding rates at 3.75 per cent, which continues to support the pound and limit sharper declines against the naira.
Global pressures complicate outlook
External factors remain a key variable
Rising geopolitical tensions—particularly in the Middle East—have pushed Brent crude prices above $100 per barrel, boosting Nigeria’s oil revenues but also fuelling global inflationary risks.
For the UK, elevated energy costs could reinforce a “higher-for-longer” interest rate stance, potentially sustaining some strength in the pound.
Pound weakens on global risk sentiment
Despite its relative resilience against the naira, the British pound has faced broader pressure in global markets.
It recorded modest weekly losses against the US dollar, weighed down by:
- Risk aversion linked to geopolitical tensions
- Safe-haven demand for the dollar
- Weak UK retail sales, which declined by 0.4% in February
The Bank of England has signalled caution, with policymakers indicating a high threshold for further rate hikes amid uncertainty over global conflicts.
Meanwhile, expectations for near-term rate cuts by both the BoE and the US Federal Reserve have been largely priced out by markets.
Outlook: fragile but improving
While the naira’s recent performance reflects growing confidence in reform measures, analysts caution that stability remains fragile and highly sensitive to both domestic policy consistency and global shocks.
For now, however, the combination of tighter monetary policy, improved liquidity, and stronger reserves appears to be anchoring the currency on a more stable path.
