After weeks of volatility, the naira has strengthened in the black market, trading at ₦1,575 per dollar, up from its previous low of ₦1,590. This recovery comes as dollar demand eases, while the official exchange rate remains under pressure, weakening slightly to ₦1,528.03/$1, according to the Central Bank of Nigeria (CBN).
What’s Driving the Naira’s Movement?
The recent fluctuations in the naira’s exchange rate stem from several key factors:
Dollar Shortages: Persistent forex supply imbalances have exerted pressure on the naira.
Fluctuating Market Demand: While black market demand for dollars has eased, the official exchange rate continues to experience volatility.
External Reserves Growth: Nigeria’s foreign reserves have increased to $38.4 billion, bolstered by rising remittance inflows and government measures aimed at attracting forex inflows.
Remittance Inflows Surge, Boosting Reserves
Nigeria’s remittance inflows soared to $1.91 billion in 2024, contributing to a 24.2% increase in external reserves to $40.88 billion. Under CBN Governor Olayemi Cardoso, the bank aims to further boost monthly remittances to $1 billion by issuing diaspora bonds in the U.S., attracting more foreign inflows.
Thanks to recent economic reforms, monthly remittance inflows have already increased from $250 million to $600 million, enhancing investor confidence and strengthening Nigeria’s financial standing.
What’s Next for the Naira?
Analysts predict that increased forex inflows, government policy adjustments, and rising investor confidence could further stabilize the naira. However, external factors such as global oil prices and inflation remain critical challenges to full recovery.
For now, the latest gains offer a glimmer of hope, but the naira’s future will depend on how effectively the government manages forex supply and economic policies in the coming months.
Conclusion
The naira’s recent rebound in the black market signals improved forex liquidity and policy effectiveness, but continued vigilance is needed. Monitoring external reserves, remittance trends, and government reforms will be crucial in determining whether this positive momentum is sustainable.