By Seun Ibiyemi
The Nigerian naira recorded a mixed performance across segments of the foreign exchange market on Monday as traders and investors weighed the impact of improved dollar liquidity against persistent demand pressures and global economic uncertainties.
At the Nigerian Foreign Exchange Market (NFEM), the local currency continued to trade within a relatively stable band, reflecting the Central Bank of Nigeria’s ongoing efforts to sustain liquidity and stabilise the market through policy reforms and enhanced transparency.
Market analysts said the naira’s performance was supported by increased crude oil production, stronger foreign exchange inflows and renewed investor confidence in Nigeria’s economic reforms.
The country’s crude oil output recently rose above its quota under the Organisation of Petroleum Exporting Countries, boosting expectations of higher foreign exchange earnings.
The relative stability of the naira in recent months marks a significant improvement from the volatility experienced in previous years, when acute dollar shortages, speculative activities and widening gaps between official and parallel market rates exerted severe pressure on the local currency.
Financial experts noted that the apex bank’s monetary tightening measures, including the retention of high interest rates and interventions aimed at improving market efficiency, have helped moderate exchange rate fluctuations.
However, despite the gains recorded in the official market, demand for foreign currency by manufacturers, importers and individuals continues to exert pressure on the naira. Concerns over external reserves, global oil price movements and inflationary pressures also remain key factors influencing market sentiment.
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Economic analysts observed that while recent improvements in foreign exchange liquidity have narrowed arbitrage opportunities, sustaining the naira’s stability would require continued growth in non-oil exports, increased foreign direct investment and stronger domestic production.
“The current stability in the foreign exchange market is encouraging, but long-term appreciation of the naira will depend on structural reforms that boost productivity and diversify sources of foreign exchange earnings,” an economist said.
Market participants are expected to closely monitor the Central Bank’s next policy decisions, developments in the international oil market and broader macroeconomic indicators for further signals on the direction of the naira.
Looking ahead, analysts believe the local currency may continue to trade within a narrow range in the short term, supported by improved market confidence and rising oil revenues, although external shocks and domestic demand pressures remain significant risks to its outlook.
