The Nigerian naira strengthened against both the U.S. dollar and the British pound on Wednesday, buoyed by sustained liquidity in the official foreign exchange market and continued monetary tightening by the Central Bank of Nigeria (CBN).
According to CBN data, the naira appreciated to ₦1,369/$ at the Nigerian Foreign Exchange Market (NFEM), improving from ₦1,376/$ recorded on June 30. The ₦7 gain marks a continuation of the currency’s recovery after it weakened to ₦1,389/$ during trading on June 24.
The rebound comes as official market liquidity remains robust, with the preceding trading session recording more than $1.06 billion in total turnover, underscoring sustained dollar availability despite recent exchange-rate volatility.
Robust Dollar Supply Supports the Market
Latest NFEM data showed the official market maintained relatively stable trading conditions.
The naira traded within a range of ₦1,368/$ and ₦1,378.50/$, while the weighted average exchange rate settled at ₦1,372.41/$.
Interbank foreign exchange transactions reached $90.3 million during the session. By comparison, the previous trading day witnessed significantly stronger activity, with $1.067 billion traded on the NFEM alongside $269.9 million in interbank transactions.
The sustained turnover suggests that dollar liquidity has remained healthy, helping cushion the local currency against external pressures.
Naira Also Gains Against the Pound
The local currency also appreciated against the British pound.
Based on official cross rates using CBN foreign exchange data and international currency markets, sterling traded at approximately ₦1,825/£, strengthening from about ₦1,831/£ at the close of the previous session.
In the parallel market, the pound exchanged at around ₦1,905/£, reflecting continued retail demand for foreign currency from importers, travellers and other private-sector users.
The relatively narrow spread between official and parallel market rates suggests improving price convergence, a development market participants say reflects stronger confidence in the official foreign exchange window.
CBN Policies Continue to Tighten Liquidity
The naira’s recent stability has coincided with the CBN’s aggressive liquidity management strategy.
With the Monetary Policy Rate (MPR) at 26.5% and the Cash Reserve Ratio (CRR) maintained at 45%, the apex bank has significantly reduced excess naira liquidity within the banking system.
Analysts say tighter liquidity reduces speculative demand for foreign currency by limiting the amount of naira available for arbitrage and parallel market activity.
At the same time, the CBN has continued to support the foreign exchange market through calibrated Bureau de Change (BDC) interventions, stronger foreign reserve accumulation and improved foreign currency inflows from crude oil exports, diaspora remittances and portfolio investments.
These measures have helped reduce volatility and improve overall market confidence.
Currency Recovers After Volatile June
The naira experienced notable fluctuations during the final weeks of June before regaining momentum at the beginning of July.
Official market data showed the currency moved from ₦1,389/$ on June 24 before gradually strengthening through subsequent trading sessions to close at ₦1,369/$ on July 1.
Although exchange-rate movements remained volatile, consistently high trading volumes throughout the period indicated that foreign exchange supply remained relatively resilient.
Global Markets Await U.S. Jobs Data
International developments also remain an important driver of Nigeria’s foreign exchange market.
The U.S. dollar traded broadly steady ahead of the release of June’s U.S. non-farm payrolls report, a closely watched indicator that could shape expectations for future interest rate decisions by the U.S. Federal Reserve.
The Dollar Index, which measures the greenback against a basket of major currencies, hovered around 101.38 as investors weighed signs of moderating inflation against continued strength in the U.S. labour market.
Meanwhile, the British pound found support after renewed expectations of fiscal discipline from the United Kingdom’s incoming political leadership improved investor sentiment toward sterling.
Because global interest rate expectations influence capital flows into emerging markets, shifts in U.S. monetary policy continue to have significant implications for Nigeria’s exchange rate outlook.
Outlook Hinges on FX Inflows
Market participants expect the naira’s performance in the coming weeks to depend largely on the sustainability of foreign exchange inflows.
Oil export receipts, diaspora remittances, foreign portfolio investments and continued central bank interventions are expected to remain key sources of dollar liquidity for the official market.
Any deterioration in these inflows, or a renewed strengthening of the U.S. dollar globally, could increase pressure on the local currency.
BuyerMetrics Insight
The naira’s appreciation against both the dollar and the pound reinforces signs that Nigeria’s foreign exchange market is becoming more orderly after months of volatility. High official market turnover and the narrowing gap between official and parallel market rates suggest that liquidity conditions have improved and speculative pressures are easing.
However, maintaining this stability will require more than monetary tightening. Sustained foreign exchange inflows from oil exports, non-oil exports, diaspora remittances and foreign investment will be essential to reducing reliance on central bank interventions. While the recent gains are encouraging, the long-term strength of the naira will ultimately depend on Nigeria’s ability to generate consistent dollar earnings through productive sectors of the economy rather than policy support alone.
