Market News

The Nigerian Naira appreciated and reached an exchange rate of N1,386 to the dollar this week. This shift is partly due to the weakening US dollar and struggles in other global currencies, like the Japanese yen, which is trading at ¥153.

While seeing the Naira gain value is encouraging, we must be careful. We need a stable and predictable Naira more than a rapidly appreciating one. If the currency gains value too quickly, it could hurt the economy. At its current level, the naira supports our exports by keeping them attractive and competitive. Any sudden surge in value would make Nigerian goods more expensive for foreign buyers, a risk we cannot afford right now.

Challenging the sceptics

Critics and “short sellers” who bet against the Naira are in for a surprise. A specific “Reddit gang” claims they see nothing inspiring in the Nigerian economy. These critics, often living thousands of miles away, say they do not believe any data from the Central Bank (CBN) and the National Bureau of Statistics (NBS). Many of them couldn’t even locate Zungeru on a map. But make their forecast from their comfortable abodes, carrying many young people with them in their “everything Nigeria is bad” view.

These sceptics refuse to acknowledge that aligning the Naira with market forces and removing fuel subsidies were necessary steps. Today’s harsh economic realities are the result of delaying these decisions for years. However, progress is visible. Fuel prices have dropped from N1,100 in January 2025 to N790 by December 2025. Fuel queues are gone. These reforms are working, and we must sustain them.

We are also now profiting from international crude oil prices, whether down or up. When the prices are down, our domestic fuel prices also adjust downward, with the corresponding effect on local transportation costs and inflation. When the prices rise, our oil earnings also go up.

We are turning the tide.

Nigeria is not yet out of the doldrums. Hardship remains pervasive, poverty is widespread, and corruption continues to corrode our institutions. Wasteful governance is still a reality.

Despite this, the economy is turning a corner. Even the harshest critics cannot deny the current “serendipity” our economy is experiencing. Reserves stand at $46 billion, and inflation has dropped to 14% from 30% in January 2025. The Foreign Exchange (FX) market is now functional and transparent.

The Nigerian FX market currently receives $8 billion in monthly inflows from diverse sources.

While some dismiss this as mostly volatile “foreign portfolio investments” that are not stable, the consistency of these flows is creating stability. Foreign Direct Investment (FDI) is following, highlighted by Shell’s recent $20 billion investment pledge. Furthermore, Nigerian independent oil players are taking over marginal fields, pushing us toward a goal of 2 million barrels of crude oil production per day.

Manufacturing and markets

The manufacturing sector is responding well. For the first time in years, manufacturers can buy FX for raw materials at market rates without bribing officials. There are no longer multiple “windows” or hidden prices. Even bureau de change operators buy at the same market rate. No subsidy there.

The stock market is also surging. Prices are rising as stocks reprice to match inflation and growth trends. After a strong close to 2025, the new year is expected to perform just as well.

The electricity bottleneck

The biggest drag on the economy and our confidence is the electricity crisis. The lack of reliable power is an embarrassment to this administration. We are not trying to discover new technology; electricity has existed for over a century. There should be no excuse. Whatever the excuse is, it is not good enough.

The German company Siemens has been working on the National Grid since 2020, yet the grid continues to collapse. There is no excuse for this failure. South Africa faced similar issues with their own electricity company Eskom – ageing infrastructure, lack of adequate funding and corruption – but they took it as a national priority.

By reorganising and including private sector participation and even recalling experienced engineers back to work. South Africa recently celebrated 240 consecutive days without load shedding. This turnaround began in 2023 and was achieved by 2026.

Nigeria’s way forward

I have written in the past that

Further investment in the National Grid is a waste of resources. It is time to decentralise the system regionally. Generating 13,000 MW but only delivering 5,000 MW is a disgrace. The recent electricity market reforms are a move in the right direction, but the action required to make improvements happen quickly is too slow. The government needs to declare an emergency on our electricity situation.

We must also create incentives for solar expansion to reduce the pressure on the failing grid.

Without electricity, everything else is on hold.

Victor Ogiemwonyi is a retired investment banker and writes from Ikoyi, Lagos.