Policies by the Central Bank of Nigeria (CBN) are undoubtedly stabilising the foreign exchange market as well as improving the foreign reserve outlook. But there are questions on whether a N1000/$ is achievable and what a sustained N1500/$ means for the economy, COLLINS OLAYINKA and JOSEPH CHIBUEZE write.

While there is obvious stability in the exchange market as official and unofficial rates converge, the settling of naira above N1,000 is discomforting for most Nigerians, especially the manufacturing sector, which has continued to grapple with the high cost of production.

The year 2025 is described by many as the year of the naira. At the weekend, the Nigeria Economic Summit Group (NESG) shared its optimism, saying ongoing reforms and policy intervention by the CBN would ultimately push the value of the currency to N1300/$ this year – a significant improvement on the current exchange value but far from N1000/$ many consider should be the target.

Amid the projection, a strong and stable foreign reserve will play a crucial role. For context, before President Bola Tinubu assumed office, data from the Central Bank of Nigeria (CBN) indicated that Nigeria’s external reserves fell by $2.85 billion in the first half of 2023 due to external debt finance, among other challenges.

The apex bank also revealed in its figures on movement on foreign reserves that the reserves, which commenced January 3, 2023, at $37.07 billion, fell to $34.22 billion as of the end of June 26, 2023 – barely one month into Tinubu’s administration. At $38.7 billion, the exchange rate is not considered a red flag, but improved oil production and a more aggressive export growth programme are exchanged to help in further accretion.

The CBN’s policy, while it resulted in the low value of the naira, delivered foreign market stability, the inflow of foreign portfolio investments, increased foreign reserves and spearheaded the return of investors’ confidence in the Nigerian economy.

The CBN bank has intensified its market interventions, increasing foreign exchange supply to retail consumers, mitigating market distortions and effectively managing and growing foreign reserves.

Also, the influx of liquidity into the market and the growing adherence to foreign exchange regulations have prevented the sharp depreciation of the naira at official and parallel markets while simultaneously attracting foreign investors’ interest in the domestic economy.

To ensure its exchange rate stability mandate, the central bank recently injected $360 million into the market through authorised dealers. This intervention helped mitigate a steeper devaluation amidst the resurgence of demand pressures.

The official FX rate is N1,530/$, while the parallel market rate is around N1,550/$. CBN’s robust interventions, such as the recent sale of $360 million to authorised dealers, have helped stabilise the naira.

The stability is also driven by inflows from foreign portfolio investors (FPIs), substantial contributions from international oil companies (IOCs) and the CBN’s $18.4 million previous interventions to authorised dealers.

The impacts recorded by the CBN’s interventions have led to the renewed interest of Foreign Portfolio Investors (FPIs) in the FX market, largely driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions.

A detailed analysis by experts at Cordros Research said the gross FX reserves increased by $12.06 million week-on-week to $38.36 billion after nine consecutive weeks of decline.

The report said: “Concerns about oil receipts underpinned by lower oil prices are likely to temper net FX inflows from Foreign Portfolio Investors, likely sustaining pressure on the naira. Nonetheless, CBN’s sustained market intervention and reduced market distortions are expected to prevent a sharp fall of the naira.”

On his part, the Group CEO of Baobab Group, Philip Sigwart, said the Nigerian forex market has turned a corner, with stability allowing more companies to invest in the economy.

He insisted that given the improved business confidence and stability in the FX market, his company would not only inject new capital into its operations but lend more to businesses.

Sigwart, based in Paris, at the Boabab Group headquarters, who spoke during a media briefing in Lagos, said the volatility in the FX market that made it difficult for businesses to plan and invest, has been addressed, and now is the time to invest and expand its operations in Nigeria to at least 100 branches, targeting N1 trillion balance sheet.

It is not, therefore, surprising that more stakeholders have hailed ongoing reforms that have kept the exchange rate stable and attracted a new wave of investment into the economy.

A critical stakeholder and President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, attributed the ongoing stability of the naira to timely policies.

Gwadabe said key policies like the Foreign Exchange (FX) Code, rising investors’ confidence, and foreign direct investment supporting policies are effectively putting FX speculators in check.

He admitted that the FX Code implementation is comprehensively addressing various aspects of market conduct and practices.

For instance, the policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted.
Gwadabe said the code further entrenches transparency and accountability in the FX market and continually sustains naira stability and rally.

He also supported CBN’s stance that all institutions participating in the foreign exchange market must submit a comprehensive implementation plan detailing their strategy for achieving complete compliance with the FX Code.

The plans are anticipated to receive formal approval and signature from the institution’s board of directors, accompanied by relevant excerpts from the board meeting where the plan was reviewed and endorsed.

Also, the CEO of Countryside Markets Limited, Stevens Michael, said: “For me, the whole idea is just to ensure that there is a lot more sanity in the foreign exchange market because certain characters have created a whole lot of problems over the years in the foreign exchange market. I think that is what the CBN is trying to do, and the more we’re able to sanitise the markets, I think the more stability it will achieve in the foreign exchange market.”

The CBN Governor, Yemi Cardoso, had at the launch of the Nigeria Foreign Exchange Code (FX Code), emphasised integrity, fairness, transparency, and efficiency as critical pillars for driving Nigeria’s economic growth and stability.

Cardoso: “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”

Apart from the FX Code, the apex bank also introduced the Electronic Foreign Exchange Matching System (EFEMS), which has proven successful in other economies by enhancing the functionality of the foreign exchange market.

The EFEMS was designed to address forex market distortions, curb speculative activities, and promote transparency. Commonly found in developed and developing markets, EFEMS provides real-time information on currency rates, trading volumes, and market activity.

Additionally, the CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment.

The reforms and developments reflect the bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.

The focus on remittances by Cardoso has also emerged as a game changer, as the corridor is now streamlined, and the players are witnessing institutional support that has been lacking.
As part of its efforts to boost diaspora remittances and support naira stability, the CBN recently announced the introduction of two new financial products designed to serve Nigerians living abroad.

The Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account were created to streamline remittances, encourage investments, and foster financial inclusion among Nigerians in the diaspora.

The bank noted: “The CBN is pleased to inform the general public of the introduction of the Non-Resident Nigerian Ordinary Account and Non-Resident Nigerian Investment Account targeted at Nigerians in the diaspora.”

The initiative is also expected to provide a secure and efficient platform for managing funds and investing in Nigeria’s financial markets.

Since the beginning of the year, eligible NRNs have continued to get the opportunity to own any of the non-resident Nigerian accounts.

The Non-Resident Nigerian Ordinary Account was created to facilitate remittances by enabling non-resident Nigerians to transfer foreign earnings into Nigeria and manage funds in foreign currency or naira.

Deposits from various sources, such as salaries, allowances, and dividends, are supported, along with spending on family maintenance, education, and healthcare.
On the other hand, the Non-Resident Nigerian Investment Account offers an avenue for NRNs to invest in Nigeria’s financial markets, including foreign currency-denominated bonds, fixed deposits, and local assets like equities, government securities, and mortgage products.

The CBN highlighted that both accounts provide currency flexibility, allowing holders to maintain balances in either foreign currency or naira.

Additionally, account holders can convert funds between the two currencies at the prevailing exchange rates through authorized dealers. The Non-Resident Nigerian Investment Account was specifically designed to promote investments in Nigeria’s financial instruments, particularly the diaspora bond, and encourage active participation in the country’s economic development.

The CBN emphasized that the introduction of these accounts aims to unlock the economic potential of Nigerians living abroad by boosting remittances and fostering investments in vital sectors.

For decades, diaspora remittances have emerged as a crucial source of foreign exchange for Nigeria, supplementing both foreign direct investment and portfolio investments.
Moreover, the CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.
In a report, ‘Diaspora remittances: The power behind Africa’s sustainable growth’, Regional Vice President of Africa at Western Union, Mohamed Touhami el Ouazzani, said remittances may be measured through the movement of money, but their real impact is measured in lives changed.

He disclosed that in 2023 alone, $90 billion flowed into Africa from its global diaspora, an amount that rivals the Gross Domestic Product of entire nations.

He said that remittances symbolize deep ties that keep communities connected across borders. “Families with a breadwinner working abroad depend on these funds to provide vital support for day-to-day needs.

His words: “Beyond their immediate impact, remittances are powerful drivers of economic change. They fuel infrastructure development, spur entrepreneurship, and promote financial inclusion – all essential for long-term economic development. Ghana’s National Financial Inclusion and Development Strategy (NFIDS) is simplifying access to remittances, while countries like Kenya, Ethiopia and Nigeria are tapping into diaspora bonds to fund infrastructure and other national projects.”

Indeed, for remittances to be truly transformational, they must begin with understanding and meeting people’s aspirations.

He insisted that the future of remittances in Africa transcends mere financial support, explaining, “By strategically directing funds into sectors that need them most, Africa’s diaspora is not just sending money home; they are building resilient economies and challenging traditional models of progress.”

He then asked rhetorically: “The question then becomes whether we are prepared to unlock the continent’s true potential and reshape the global narrative of success.”

Stakeholders are optimistic that the ongoing measures implemented by the Yemi Cardoso-led CBN are laying a solid foundation for the long-term renaissance of the Nigerian economy.