Naira Strengthens By N63 To Reach Seven-Month High

Naira Strengthens By N63 To Reach Seven-Month High

The Nigerian naira experienced a significant appreciation in January 2025, gaining N63.72 against the US dollar to close at N1,474.78/$ on January 31 at the Nigerian Foreign Exchange Market (NFEM)…READ MORE…

According to data from FMDQ Securities Exchange Limited and the Central Bank of Nigeria (CBN), this 4.14% increase marks the naira’s strongest position in seven months. The last time the local currency traded at a similar level was on June 11, 2024, when it stood at N1,473.88/$ in the official market.

The appreciation has been attributed to CBN policy interventions, which have influenced market trends and strengthened the currency.

Exchange Rate Movement in January

• The naira started the year at N1,538.50/$ on January 2.
• It experienced fluctuations, reaching its weakest point at N1,560/$ on January 16.
• From the third week of January, the currency began appreciating steadily.
• It closed at N1,531/$ on January 24, strengthened to N1,520/$ on January 28, and climbed further to N1,506/$ on January 29.
• By January 30, the naira stood at N1,493/$, before reaching N1,474.78/$ on January 31.

In the parallel market, the naira also strengthened, closing at N1,610/$ on Friday, up from N1,630/$ the previous day, marking a N20 gain within 24 hours.

CBN Policies Driving the Naira’s Gains

The recent improvements in Nigeria’s exchange rate have been linked to CBN’s monetary and forex policies, particularly the introduction of:

1. Electronic Foreign Exchange Matching System (December 2024):
   • Implemented through Bloomberg’s BMatch system, it allows authorized dealers to place anonymous orders into a central limit order book.
   • This has enhanced transparency, improved price discovery, and reduced market distortions.
2. Nigeria Foreign Exchange Code (Launched January 28, 2025):
   • Establishes principles for ethical trading, governance, execution, information sharing, risk management, and settlement.
   • According to CBN Governor Olayemi Cardoso, the FX Code is enforceable, with penalties for violations under the CBN Act 2007 and BOFIA Act 2020.

These measures have increased investor confidence and aligned Nigeria’s forex system with global best practices.

Foreign Reserves Decline Despite Naira’s Gains

Despite the currency’s strengthening, Nigeria’s foreign exchange reserves fell by $1.11 billion in January 2025, declining from $40.88 billion on January 2 to $39.77 billion on January 30—a 2.72% drop.

• The decline is attributed to CBN’s forex market interventions, external debt servicing, and capital outflows.
• Reserves fluctuated above $40 billion in early January but dipped below this threshold on January 23, reaching $39.77 billion by month-end.
• This trend mirrors the April 2024 reserve decline, when reserves dropped by $2.16 billion in 29 days.

While the reduction in reserves raises concerns about sustainability, CBN’s proactive measures have played a key role in stabilizing the exchange rate and managing liquidity in the forex market.

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