The Nigerian foreign exchange market is witnessing relative stability, supported by strong macroeconomic fundamentals and cautious monetary policy, with the naira strengthening to N1,375 per dollar.
Recent trading showed the local currency holding firm within a narrow range against the US dollar, reflecting reduced volatility and improved market confidence.
Market analysts note that the naira continues to face resistance around the N1,350/$ level, a key psychological and technical threshold. However, sustained foreign exchange interventions and commercial bank dollar sales have helped contain speculative pressures.
A major factor supporting the naira is the Central Bank of Nigeria’s (CBN) decision to maintain a tight monetary stance. At its 305th Monetary Policy Committee (MPC) meeting, the apex bank retained the Monetary Policy Rate (MPR) at 26.5 percent.
The decision came as headline inflation rose for the second consecutive month to 15.69 percent in April, driven largely by global energy price shocks and supply chain disruptions linked to tensions in the Middle East. The MPC opted to hold rates steady to keep inflation expectations anchored.
Nigeria’s external reserves, currently estimated at about $49 billion, have also strengthened confidence in the currency. The reserve level provides nearly nine months of import cover, giving the CBN significant capacity to defend the naira and curb excessive market volatility.
In addition, the Cash Reserve Ratio (CRR) remains at 45 percent, limiting excess naira liquidity in the financial system and reducing opportunities for speculative demand for foreign currency.
Meanwhile, the US Dollar Index (DXY), which measures the dollar’s performance against six major currencies, rebounded to 99.1 during the London trading session after recording slight losses previously.
The dollar gained support from increased demand for safe-haven assets amid uncertainty surrounding efforts to secure a lasting peace agreement between the United States and Iran.
Reports of military activity in southern Iran have heightened tensions, although US officials insist they are exercising restraint while protecting American forces. At the same time, diplomatic efforts to resolve the conflict and ensure the reopening of the Strait of Hormuz are reportedly progressing.
Despite optimism in some quarters, markets remain cautious, awaiting formal confirmation from the United States, Iran and Israel before concluding that the conflict has ended.
The Strait of Hormuz remains a critical global energy route, accounting for more than 20 percent of global oil trade. Any progress toward stability in the region is expected to ease concerns over supply disruptions and inflationary pressures.
Reflecting this outlook, global oil prices have retreated sharply in recent weeks. Brent crude has fallen significantly, reducing the geopolitical risk premium and easing fears of renewed inflationary pressures in the global economy.
For Nigeria, lower oil price volatility and stronger external reserves are expected to provide additional support for exchange rate stability in the near term.
