The naira maintained stability against the British pound at about ₦1,765 per pound in the official foreign exchange market, supported by improved foreign exchange supply and Nigeria’s stronger external reserves.
Latest Central Bank of Nigeria (CBN) data put the pound’s most recent settlement rate at approximately ₦1,765/£1, extending the naira’s relatively steady performance against the British currency in October.
The stability comes amid increased foreign exchange availability and a rise in Nigeria’s gross external reserves to $55.1 billion, their highest level in 18 years, strengthening the CBN’s capacity to manage volatility in the official market.
Net foreign reserves, after accounting for short-term foreign exchange swaps, forward commitments and other foreign currency liabilities, are estimated at about $46 billion, according to the report by Nairametrics.
The improved reserve position provides a buffer against external shocks and gives the apex bank greater capacity to intervene when foreign exchange demand puts pressure on the naira.
Oil receipts, investment inflows underpin naira
Nigeria’s foreign exchange stability remains closely linked to crude oil export earnings, foreign direct investment and other capital inflows.
Higher oil receipts can strengthen the country’s reserve position, while increased foreign exchange supply helps the market meet demand from importers, businesses and other users of foreign currency.
The CBN’s foreign exchange market interventions have also helped moderate excessive fluctuations, while reforms aimed at allowing exchange rates to reflect market conditions have narrowed the gap between official and parallel-market rates.
The reduced gap has weakened incentives for round-tripping, a practice in which traders exploit differences between official and parallel-market exchange rates for profit.
Pound’s outlook remains uncertain
Despite the naira’s relative stability against sterling, the immediate direction of the exchange rate remains uncertain.
Market indicators cited by Nairametrics suggest the pound-naira pair has retreated from levels near ₦1,948 earlier in the year towards a technical support level around ₦1,750.
The report also identifies a largely sideways trading pattern, indicating that neither buyers nor sellers currently have a decisive advantage.
Developments in the United Kingdom’s monetary policy could influence sterling’s performance against emerging-market currencies, including the naira. Expectations about whether the Bank of England will ease interest rates or maintain its benchmark rate remain relevant to the pound’s direction.
The pound also gained support against the US dollar from stronger-than-expected UK economic data and expectations surrounding US interest rates.
For Nigeria, sustained stability against sterling will depend partly on the consistency of foreign exchange inflows, oil-market conditions, investor confidence and the CBN’s management of market liquidity.
While stronger reserves and improved FX supply provide support, the latest exchange-rate performance does not guarantee that the naira will maintain the same level in subsequent trading sessions.
Nairametrics
