Marché Nouvelles

By Chinwendu Obienyi

The naira showed significant strength, closing January 2025 at N1,474.78/$1, at the Nigerian Foreign Exchange Market (NFEM), marking its strongest level in seven months.

It will be recalled that the naira had recorded 40.9% depreciation against the dollar in the official market despite notable growth in external reserves.

However, the December 2024 Business Expectations Survey (BES) conducted by the Central Bank of Nigeria (CBN) revealed that businesses anticipated a steady appreciation of the local currency in the coming months.

“Businesses expect the naira to appreciate in the current month and the next three months, with significant projected growth within the next 6 months,” the survey stated.

Similarly, the parallel market rate appreciated 1.1% to N1,617.00/$1.00 (as of 30/01/2025). Last week, the naira strengthened significantly, appreciating by 3.8% week-on-week (w/w) to N1,474.78/$1 at the official market.

According to Cordros Research, a research and investment based firm, the appreciation was driven by inflows from Foreign Portfolio Investors (FPIs), substantial contributions from International Oil Companies (IOCs), and the CBN’s $18.40 million intervention to authorised dealers.

However, the country’s FX reserves declined for the fourth consecutive week by $218.05 million w/w to $39.77 billion (29 January). Thus, at the end of January 2025, FX reserves dropped by $1.11 billion or 2.7% month-on-month (m/m) from $40.88 billion recorded in December 2024.

In the forwards market, the naira rates increased across the 1-month (+3.8% to N1,533.09/$1), 3-month (+3.9% to N1,605.02/$1), and 6-month (+4.3% to N1,705.97/$1), and 1-year (+2.6% to N1,912.21/$1) contracts.

Reacting to the performance of the naira, economic analysts noted that sustained reforms from the CBN have helped stabilize the currency since December 2024.

“Increased foreign exchange earnings, bolstered by higher crude oil sales and improvements in manufacturing and agricultural sectors. Also, reduced importation of petroleum products due to increased domestic refining capacity, eased pressure on foreign exchange demand”, they said.

While the current rate hasn’t reached that level yet, the trend shows significant progress towards that projection.

“The renewed interest of Foreign Portfolio Investors (FPIs) in the FX market—driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions—alongside the CBN’s sustained market interventions, is expected to support naira stability in the short term”, analysts at Cordros Research said.

For their part, analysts at Afrinvest Research, said, “In the new month, we expect the naira to remain on a positive trajectory bolstered by CBN’s effort at currency stability”.