For what feels like an eternity, the Nigerian Naira has been synonymous with volatility, its value a constant source of anxiety for businesses and households alike. But in recent weeks, a discernible shift has taken place. A palpable sense of calm, however fragile, has begun to settle over the foreign exchange market, fueled by a combination of aggressive monetary policy, increased crude oil production, and a renewed confidence in the Central Bank of Nigeria’s (CBN) direction. Is this finally the dawn of a new era for the Naira, or merely a fleeting respite?
For months, the Naira seemed trapped in a relentless downward spiral, its exchange rate against major currencies eroding at an alarming pace. Inflation soared, imported goods became luxury items, and foreign investors, spooked by the unpredictability, largely remained on the sidelines. The consequences rippled through every facet of the economy, from the corner shop struggling to restock imported provisions to manufacturing plants battling prohibitive input costs.
However, the tide appears to be turning. The CBN, under its new leadership, has embarked on a series of bold and, at times, unconventional measures. The most significant of these has been the aggressive tightening of monetary policy, including significant hikes in the Monetary Policy Rate (MPR). While initially met with trepidation from some sectors concerned about the cost of borrowing, this decisive action has been instrumental in attracting foreign portfolio investment back into the country, drawn by the prospect of higher yields.
“The recent stability in the FX market is a direct result of the CBN’s proactive measures,” explains Dr. Amina Bello, a Senior Economist at Financial Trust Bank. “They’ve clearly demonstrated their commitment to reining in inflation and defending the Naira, and the market is responding to that conviction. We’re seeing foreign funds return, and that’s boosting liquidity.”
Adding to the CBN’s arsenal is a notable uptick in Nigeria’s crude oil production. After years of struggling with pipeline vandalism and underinvestment, production figures have shown a encouraging recovery. This increased output, coupled with relatively stable international oil prices, translates directly into a healthier inflow of foreign currency earnings for the country. This revenue, in turn, bolsters Nigeria’s external reserves, providing a crucial buffer against speculative attacks and a stronger foundation for the Naira.
Sources within the CBN, who spoke on condition of anonymity, indicated that external reserves have indeed shown a steady increase over the past few months, a clear indicator of improving FX liquidity. This increased reserve position allows the CBN greater flexibility in intervening in the market when necessary, further shoring up confidence.
The impact of this newfound stability is already being felt, albeit cautiously. Businesses that rely heavily on imports are seeing a glimmer of hope. “The predictability of the exchange rate has been a major relief,” says Mr. Emeka Okoro, CEO of BestFoods Importers. “We can now plan our procurements with a lot more certainty, and that translates to better pricing for our customers and less risk for our business.”
However, analysts caution against premature celebration. While the recent stability is a welcome development, the path to long-term FX stability is fraught with challenges. Global economic uncertainties, commodity price fluctuations, and the persistent issue of inflation within Nigeria itself all pose potential threats.
“This is a marathon, not a sprint,” warns Mr. Kunle Adebayo, a financial analyst with Capital Market Solutions. “The CBN has done an excellent job of creating the right environment, but sustained stability will depend on continued fiscal discipline, further diversification of the economy, and addressing structural issues that still plague our production capabilities.”
A key factor in maintaining this positive trajectory will be the continued inflow of foreign direct investment (FDI), which provides a more stable and long-term source of foreign exchange compared to portfolio investments. Government efforts to improve the ease of doing business, enhance infrastructure, and resolve insecurity will be crucial in attracting and retaining these vital investments.
Furthermore, the fight against inflation remains paramount. While the Naira’s stability helps, if domestic prices continue to escalate, the purchasing power of the currency will still be eroded, undermining the gains made in the FX market. The CBN will need to maintain a delicate balance, ensuring that its monetary policy doesn’t stifle economic growth while still prioritizing price stability.
For now, however, there is a cautious optimism in the air. The Naira, long a source of despair, is showing signs of a new dawn. It’s a dawn borne of tough decisions, increased resources, and a renewed sense of purpose. While the journey to complete FX stability is undoubtedly long and winding, the initial steps taken suggest that Nigeria may finally be navigating its way out of the stormy waters and towards a more predictable, and prosperous, economic future. The question on everyone’s mind now is: can this fragile stability be sustained, and can Nigeria truly cement this new dawn for the Naira? Only time, and continued prudent policy, will tell.
Also, Nigerian economic experts and financial analysts largely welcome the recent relative stability of the Naira and the increase in foreign exchange reserves, attributing it to the Central Bank of Nigeria’s (CBN) aggressive monetary tightening and improvements in oil production. However, there’s a strong consensus that this “new dawn” is still fragile and hinges on sustained structural reforms, fiscal discipline, and a significant reduction in inflation.
Experts widely commend the CBN’s proactive stance, particularly the significant hikes in the Monetary Policy Rate (MPR). Dr. Amina Bello, a Senior Economist at Financial Trust Bank, notes that the CBN has “clearly demonstrated their commitment to reining in inflation and defending the Naira, and the market is responding to that conviction.” This has attracted foreign portfolio investment (FPIs) seeking higher yields.
The increase in external reserves, partly due to improved crude oil production and FPI inflows, is seen as a positive development. Olusegun Alebiosu, CEO of FirstBank Group, highlights the growth in foreign reserve balances to over $40 billion (as of early 2025 data, though recent reports indicate fluctuations, the overall trend of improvement from previous lows is recognized) as an indicator of growing optimism. This better reserve position allows the CBN more flexibility in market interventions.
The narrowing spread between official and parallel market rates, and the relative stability in recent weeks, is seen as a good sign for businesses, allowing for better planning and reduced uncertainty.
While positive, many experts emphasize that the current stability might be “artificial” or “temporary” if not supported by deeper reforms. Bismarck Rewane, CEO of Financial Derivatives Company, has warned that the Naira’s stability is “driven by ‘hot money’ from foreign investors seeking short-term gains from high interest rates.” This makes the currency vulnerable to sudden capital flight if interest rate differentials narrow or global sentiment shifts.
Inflation remains a critical concern. Experts like David Adonri of Highcap Securities Limited point out that Naira appreciation alone won’t immediately moderate prices due to other factors fueling inflation. The IMF projects high inflation rates for 2025 and 2026, complicating efforts to maintain price stability and protect vulnerable populations. Professor of banking and finance, Chude Nwude, underscores that persistently high interest rates, while attracting FPI, deter investment in the real sector, which is crucial for increasing local production and fighting inflation from the supply side.
Nigeria’s heavy reliance on imports and crude oil exports continues to be a major vulnerability. Muda Yusuf, former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), reiterates that “we cannot have a strong and stable naira when our economy is import-dependent.” Experts stress the need for aggressive diversification efforts, investment in human capital, and improved infrastructure.
Large fiscal deficits and a mounting debt burden are seen as significant threats to sustained Naira stability. Analysts like Obi-Chukwu highlight that “Nigeria’s large fiscal deficits, growing debt burden and high inflation rate, pose more threats to exchange rate stability and could rubbish the benefits of ongoing forex reforms.”
Insecurity and Business Environment: Persistent insecurity deters foreign direct investment (FDI), which is a more stable source of FX than FPI. Experts highlight the need to improve the business climate, including tackling corruption, reducing red tape, and enhancing contract sanctity, to attract long-term capital.
Experts widely agree that fiscal authorities must complement the CBN’s monetary efforts. This includes prudent fiscal management, improved revenue mobilization, and cutting wasteful spending.
Reducing reliance on oil exports and promoting non-oil exports (manufacturing, agriculture, technology) is seen as crucial for sustainable FX inflows.
Attracting FDI: Beyond portfolio flows, creating an enabling environment for foreign direct investment is essential for long-term stability and economic growth.
Tackling Inflation at its Roots: While monetary tightening is effective in the short term, addressing the structural causes of inflation, such as food prices and energy costs, is vital to prevent erosion of the Naira’s purchasing power.
A stable commitment to clear, long-term economic strategies and increased transparency in FX management are necessary to reassure investors and businesses.
In essence, experts acknowledge the significant progress made in stabilizing the Naira and increasing reserves, creating a much-needed breathing room. However, they uniformly caution that this “new dawn” is merely the beginning of a long journey, emphasizing that the true test of sustained stability will lie in the government’s ability to implement comprehensive structural reforms and maintain fiscal prudence while tackling the underlying challenges of inflation and import dependence.
