The Central Bank of Nigeria (CBN) has started buying US dollars from the market to slow down the rapid rise of the naira.
Last week, the CBN bought about $189.80 million to reduce excess dollar supply and control how fast the naira was gaining value.
The naira had been rising quickly at the official foreign exchange window. However, it slightly dropped during the last three trading days that ended on Friday.
Some financial experts warned that if the naira continues to rise too fast, foreign investors may pull their money out of Nigeria’s fixed-income market. If they sell their investments, it could increase demand for US dollars and lead to more dollar outflow from the economy.
To prevent possible market instability, the CBN stepped in by buying dollars — something it has not done in a long time.
According to a report by TrustBanc Financial Group Limited, the currency strengthened in both the official and parallel markets last week.
At the official market, the naira gained N9.09, closing at N1,346.32 per dollar.
At the parallel market, it appreciated by N60, closing at N1,340 per dollar.
The gap between the official and parallel exchange rates reduced sharply to 0.47%, compared to 3.29% the previous week. This shows that the two markets are becoming more aligned.
Analysts also said higher oil prices, increasing foreign reserves, and ongoing economic reforms are helping to keep the naira stable despite global uncertainties.
The gap between the official and parallel exchange rates reduced sharply to 0.47%, a significant drop from 3.29% recorded the previous week. This narrowing of the spread indicates a much closer alignment between the official and parallel forex markets, reflecting improved market stability and investor confidence.
Financial analysts noted that this convergence could encourage greater participation from both domestic and foreign investors, as the risks associated with wide discrepancies between market rates are minimized.
The development also suggests that government policies and interventions, including the Central Bank of Nigeria’s recent dollar purchases, are having a measurable impact on market dynamics.
Experts also highlighted that several macroeconomic factors are contributing to the naira’s relative stability. Firmer oil prices, which continue to strengthen Nigeria’s foreign exchange earnings, rising foreign reserves, and ongoing reform-driven capital inflows are all playing a critical role.
Despite lingering geopolitical tensions and uncertainties in the global economy, these factors are helping to cushion the naira from sharp volatility.
Analysts believe that if these trends persist, the currency could maintain a more predictable trajectory, benefiting businesses, investors, and consumers alike, while reducing the risk of sudden shocks to the economy.
