Market News

By Oluwakemi Abimbola

The recent foreign exchange reforms of the Central Bank of Nigeria have been highlighted as being key to the stability of the naira, a development which analysts said has been helping in the exchange of naira for the Chinese yuan.

This assertion followed claims by some FX traders that recent stability recorded in the FX market is driven by Chinese traders now collecting naira in exchange for their currency, instead of dollars.

Speaking with The PUNCH, the Head of Agusto Consulting, Jimi Ogbobine, said reforms introduced under the current CBN leadership have calmed the foreign exchange market, easing volatility that previously shook investor confidence. He explained that while the naira initially suffered instability when the reforms were rolled out, it has since found balance within a predictable trading band.

He said, “So, what the CBN reforms under the current Governor of the CBN have put in place is to help stimulate autonomous supply of foreign exchange into the country. With these supplies, what we see is that the naira initially took a huge bashing and suffered a period of instability, but the naira has stabilised within a fairly predictable trading band. What the markets have always asked for in the foreign exchange market in Nigeria has been stability. That’s what the markets have asked for. The rest of the country has asked for a strong naira. All the markets and all the economic players in the market have always asked for, and it hasn’t been a strong naira; it has been a stable naira. So, even if the naira is going to be weak, let it achieve some stability in this weakness, which we have finally achieved.

“So, this new market is opening up now; it is opening up on the back of that stability that we have achieved. I still hold that what’s helping to attract that Chinese trade is the stability of the naira, because at the end of the day, the naira is still a soft currency, not traded internationally, which means that every time a third currency comes in to deal with the naira, there’s always a cross-referencing with the dollar. So, every time, whether it’s the Chinese yuan investors coming in or the euro investors coming in, because it’s a fairly stable naira-to-dollar market, then it helps their cross-referencing. Because if you take away that stability between the naira and the dollar, then even those Chinese yuan markets would also fade away.”

The yuan’s growing role in Nigeria’s trade is seen as part of a broader effort to diversify foreign exchange sources and reduce overdependence on the U.S. dollar. With China standing as Nigeria’s largest trading partner, a more predictable naira-dollar rate indirectly supports yuan-denominated transactions, offering businesses more confidence in cross-border deals.

Economist and Chief Executive Officer of Economic Associate, Dr Ayo Teriba, also added that the naira’s value relative to the dollar is what matters, not its relation to other currencies like the Chinese yuan.

He said, “Anybody can give any reason, but I don’t think the relation between naira and yuan makes any difference. The only time the stability of the naira was challenged this year was when Trump made the initial (trade) announcement and global markets collapsed. It went to 1,600/$, and since he suspended the tariffs, it has stabilised. As long as he is not doing something that is rocking global markets, the naira will be stable.”

Teriba added that a real reason to celebrate the naira, which has held steady at around 1,500/$ for months now, would be for it to strengthen further to 1,400/$ and lower. He, however, expressed optimism that the reserves are doing better now.

“Particularly, net reserves are rising, and that helps the Central Bank to stabilise. Trump is not rocking the global markets. If he rocks the global markets again or does anything that rocks the global markets, you will see the naira go to 1,600/$, 1,700/$. So, thank God for tranquillity in global markets. Let’s hope that the peacefulness of global markets will continue, and let’s hope that remittances will keep arriving and portfolio funds will stay here. So, reserves can stay healthy.

“It (naira) can continue to be stable, but nobody should be looking for any special explanation for 1,500/$. If it goes to 1,000/$, call me; let’s look for a special explanation.”

Senior Market Analyst at FXTM, Lukman Otunuga, said, “The naira has kicked off September as one of the best-performing African currencies versus the dollar and Chinese yuan. It has gained roughly 0.5 per cent against the USD while rising 0.8 per cent versus the Yuan. This could be attributed to growing confidence over the local currency’s outlook amid reports that Chinese traders are now collecting naira for its currency instead of the dollar. In December 2024, the Nigeria-China currency swap agreement was renewed for $2bn, with the aim of streamlining direct trade in local currencies.

“Ongoing drama revolving around Trump’s tariffs has roiled global markets and sparked dollar volatility. Removing the USD from the equation may further streamline trade between Nigeria and China. Such a development could support the Naira in the longer term, given how China remains its biggest trading partner.”

He added that other forces are helping the Naira. He highlighted President Bola Tinubu’s claims of the FG meeting its revenue target for 2025 in August, on the back of revenue from the non-oil sector.

“Such a development may cushion the country from external shocks and trade uncertainty. Considering how this will reduce Nigeria’s dependence on external loans, this may provide further support to the Naira as sentiment improves. Beyond this, the naira has been supported by rising capital inflows, intervention from the CBN, signs of easing inflationary pressures, and improving economic conditions. Nigeria’s economy is projected to post stronger growth in Q2 2025, with markets projecting GDP to expand 3.6 per cent versus 3.13 per cent in the previous quarter.”

Backing the FX reforms, the Director-General of the Budget Office of the Federation, Tanimu Yakubu, in a piece over the weekend, asserted that though initially painful, they transformed the naira from a symbol of weakness into a driver of competitiveness by allowing it to find its true value, which boosted exports, restored investor confidence, and set Nigeria on a path toward sustainable, export-led growth.

Yakubu said that “increased oil receipts, swelling diaspora remittances, and the clearing of over $4 bn in foreign exchange backlogs restored investor trust. The unification of Nigeria’s FX windows created a single, transparent market rate, finally letting the currency find its realistic value. Why does this matter? Because a realistic exchange rate does more than please economists, it changes the very arithmetic of trade. Nigerian goods, once overpriced in dollars due to an artificially strong naira, suddenly became bargains on global markets. A bag of sesame seeds, cocoa beans, or even processed chocolate instantly costs less in New York, Mumbai, or São Paulo, without the Nigerian farmer or factory owner earning less in naira terms.”

He added that non-oil exports jumped from $2.696bn in H1 2024 to $3.225bn in H1 2025, a 19.62 per cent year-on-year growth, saying, “This wasn’t just a ‘price illusion’. Export volumes rose from 3.83 million to 4.04 million metric tonnes, proof that foreign buyers weren’t just paying more for the same goods; they were buying more goods, period.”

A “sweet spot” which he identified for the currency was that Nigerian goods were cheaper than competitors for buyers abroad, and “for exporters at home, the naira value of earnings soared, enabling reinvestment into value-added processing, turning raw cocoa into chocolate bars and raw sesame into bottled oil. For the economy, the export surge pumped foreign exchange back into the system, strengthening the naira without eroding its competitiveness.”