Market News

Tunde Lemo, former Deputy Governor of the Central Bank of Nigeria (CBN), has said the recent stability of the Naira and the steady growth in Nigeria’s external reserves are sustainable, citing structural reforms, improved trade dynamics and disciplined monetary management as key drivers.

Lemo, who spoke in an interview with journalists in Lagos, said the reserve accretion being recorded was underpinned by fundamental changes in the foreign exchange market and broader economy.

In the official foreign exchange market on Thursday, the Naira depreciated by N3.71, or 0.3%, with the dollar quoted at N1,359.82 compared to N1,356.11 on Wednesday at the Nigerian Foreign Exchange Market (NFEM). In the parallel market, however, the naira appreciated by N5 to close at N1,370 per dollar from N1,375 the previous day, narrowing the gap between the official and parallel market rates to 0.8% from 1.4%.

Recent gains in the currency have shown signs of moderation after the CBN stepped in to mop up excess dollars from the market to prevent an overly rapid appreciation of the naira.

Lemo argued that the improvement in reserves is not temporary. “What I’m saying in essence is that the reserve accretion that we’re seeing is very, very sustainable given what we have seen in the market,” he said.

According to him, one of the most significant reforms was not only the removal of the petrol subsidy but also the elimination of what he described as the larger “forex subsidy.” He noted that in the past, only a small fraction of Nigerians had access to dollars at heavily subsidised official rates of around N400 to the dollar, while the majority sourced foreign exchange at rates as high as N1,400 or N1,700.

“The two were matched. Of course, it felt as if the world was collapsing, but that was the right thing to do. What have we seen today? A relatively stable foreign exchange system,” he said.

He also pointed to Nigeria’s improving trade position, particularly rising non-oil exports, which he said have contributed to a trade surplus. In addition to export growth, Lemo highlighted strong diaspora remittances, estimated at about $600 million monthly, as a steady source of foreign exchange inflows.

Beyond portfolio flows, he noted that foreign direct investment is improving, with multinational companies reinvesting and expanding operations, thereby bringing in longer-term capital. He stressed that these inflows are more stable than foreign portfolio investment, often described as “hot money.”

Lemo further explained that reduced import dependence, especially on refined petroleum products, has strengthened Nigeria’s external position. In the past, he said, nearly all the foreign exchange earned from crude oil exports was used to import fuel. today, that pressure has eased, providing significant cash flow benefits and supporting reserve growth. Some oil producers are also retaining and utilising their foreign exchange earnings internally, reducing demand in the official market.

He commended the CBN’s strategy of purchasing dollars to curb excessive appreciation of the naira, describing it as a smart move to protect exports and domestic industry. According to him, a rapidly appreciating currency can undermine local production by making imports cheaper and exports less competitive.

“A stable currency over time is better than one that appreciates too quickly,” Lemo said, warning that sharp appreciation could increase the propensity to import, weaken local industries and ultimately worsen unemployment.

For these reasons, he maintained that the current combination of trade surplus, diversified inflows, subsidy reforms and cautious central bank intervention makes the naira’s stability and the ongoing build-up in reserves fundamentally sustainable.