The Nigerian naira has recorded significant gains against the US dollar, buoyed by increased foreign exchange supply and intensified security enforcement against speculative activities, forex traders have said.
The local currency appreciated to ₦1,535/$1 in the parallel market on July 29, rising from ₦1,580/$1 just days earlier. Market analysts attribute the rally to improved dollar liquidity at the official window and sustained interventions by law enforcement agencies targeting currency hoarders and illegal market operators.
“There is excess dollar supply in the market right now, and demand is no longer as strong as before,” one trader told Nairametrics. “Enforcement actions have also reduced speculative trading significantly.”
Policy Reforms Bearing Fruit
The Central Bank of Nigeria (CBN) has been pushing reforms aimed at narrowing the gap between official and parallel market exchange rates. Recent measures, including tighter supervision of bureau de change operators and improved access to foreign exchange, have begun to stabilize the market.
Security agencies such as the Economic and Financial Crimes Commission (EFCC) have also stepped up crackdowns on illegal forex operations, a move analysts say has discouraged the speculative activity that previously weakened the naira.
Broader Market Gains
The naira’s rally coincides with stronger foreign inflows into government securities, rising remittances, and improved oil revenue. Bloomberg data shows Nigeria’s local-currency bonds posted an 8.6% return in July, the best among emerging markets.
Volatility in the foreign exchange market has also eased, falling from 23% in December 2024 to just 4.6% in July. Inflation dropped to 22.2% in June, while the CBN maintained its benchmark interest rate at 27.5%, further signaling policy stability.
Outlook
Analysts believe sustained reforms and enforcement will be critical in maintaining naira stability. “Investor confidence is returning as the market becomes more transparent and liquid,” said one financial market strategist.
The convergence of exchange rates between official and parallel markets, they note, is a sign that the authorities’ multi-pronged strategy is beginning to restore credibility to the currency market.
