The naira appreciated against the dollar on Monday, boosted by a moderate inflow of foreign currencies into the Nigerian economy.
At the Nigerian Foreign Exchange Market (NFEM), the local currency gained N3 to close at N1,538 per dollar, improving from N1,541 per dollar recorded last Friday, according to data from the Central Bank of Nigeria (CBN).
The strengthening of the naira was also reflected in the parallel market, where it appreciated to 1,645 naira per dollar on Monday. This marked a significant improvement from last Friday's rate of 1,660 naira to the dollar. Market analysts have largely attributed this development to increased dollar inflows, particularly from Nigerians in the diaspora returning home for the Christmas season.
The festive period traditionally sees a surge in remittances from the Nigerian diaspora, who send money home to support their families and communities during the festivities. This influx of foreign exchange has provided some respite to the naira, which has faced significant pressure in recent months due to reduced foreign exchange inflows and growing demand for dollars in the domestic market.
Commenting on this situation, a currency trader who preferred to remain anonymous commented that the improved supply of dollars has calmed market fears of further depreciation. “The influx of dollars from diaspora remittances has had a stabilizing effect on the market. Coupled with the intervention of the Central Bank at the official window, we have seen the naira make some gains,” the trader said.
Apart from seasonal inflows, some market participants believe that recent measures taken by the CBN to curb speculative trading have contributed to the appreciation of the naira. Earlier this month, the apex bank stepped up its supervision of foreign exchange transactions and warned market operators not to engage in activities that could further weaken the local currency.
Despite the Naira's recent gains, economic analysts warn that maintaining this momentum will require long-term structural reforms. “While seasonal inflows of dollars are welcome, they are a temporary solution. To achieve a stable and competitive exchange rate, Nigeria must address the underlying factors driving foreign exchange demand such as import dependence and low export earnings,” said Dr. Ifeoma Nwankwo, a Lagos-based economist.
The Central Bank of Nigeria (CBN) has repeatedly emphasized its commitment to ensuring exchange rate stability. In its latest Monetary Policy Committee (MPC) meeting, the CBN outlined strategies to increase non-oil export earnings and diversify foreign exchange sources. These efforts, if successfully implemented, could reduce pressure on the naira in the medium and long term.
Meanwhile, businesses and consumers are hopeful that the appreciation of the naira will translate into lower costs for imported goods and services, especially as the holiday season approaches. However, some black market traders expressed concern over a possible rebound in dollar demand in the coming weeks, which could reverse the naira's recent gains.
As Nigeria continues to face economic challenges, the performance of the naira in official and parallel markets will continue to be a key indicator of the country's financial health. For now, the currency's appreciation offers a glimmer of hope for a more stable exchange rate in the near future.