Business

Market Confidence Grows as Naira Gains in Parallel and Official Markets

Published

1 month ago

Feb 18, 2025.

Naira ends gains significantly, ending the month in on a big note
Marks the strongest performance in a month
Currency improves on both parallel and black markets

The Nigerian naira made significant gains against the US dollar on Monday, marking its strongest performance in a month.

Since the beginning of the year, the currency has appreciated by ₦105 in the parallel market, commonly known as the black market.

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According to data from online trading platforms and street currency dealers, the naira rose by 6.7% in February.

On Monday, the dollar was exchanged at ₦1,560 in the black market, compared to ₦1,665 at the beginning of the month.

A currency trader, Mohammed Musa, noted that demand for the dollar has reduced, leading to a calmer market. Another trader, Yusuf Dan Umma, said, “We are buying dollars at ₦1,540 and selling at ₦1,560.”

At the Nigeria Foreign Exchange Market (NFEM), the naira also strengthened against the dollar. Between January and February 2025, the local currency appreciated by 1.8%.

At the close of trading on Friday, the naira gained ₦27.50, with the dollar trading at ₦1,511 compared to ₦1,538.50 at the start of February.

On Monday, the exchange rate remained stable, closing at ₦1,512, almost the same as Friday’s ₦1,511 and Thursday’s ₦1,515.

Currency traders at NFEM quoted the highest exchange rate for the dollar at ₦1,515 on Monday, slightly lower than ₦1,520 on Friday. Meanwhile, the lowest recorded rate on Monday was ₦1,504, compared to ₦1,500 on Friday and ₦1,501 on Thursday.

Despite the naira’s recent strength, Nigeria’s foreign reserves have been steadily declining.

As of February 13, 2025, the reserves had dropped to $39.09 billion, down from $40.88 billion at the beginning of the year. Murtala Sabo Sagagi, a member of the Monetary Policy Committee (MPC), highlighted past exchange rate improvements.

He noted that the naira strengthened from ₦1,660.33 per dollar in September 2024 to ₦1,647.47 in October 2024.

He also pointed out that Nigeria’s balance of payments showed a surplus of $2.47 billion in the second quarter of 2024, a significant improvement from a deficit of $0.95 billion recorded in the first quarter.

According to a report by the Central Bank of Nigeria (CBN), net foreign exchange (FX) flows into the country rose to $5.95 billion in November 2024.

This was a major increase compared to $1.7 billion recorded in November 2023. Net FX flow refers to the difference between the total foreign currency inflows and outflows in an economy.

A positive net FX flow means that more foreign currency is entering the country than leaving, which can help stabilize the exchange rate and boost foreign reserves.

New Naira Notes

The recent strengthening of the naira suggests improved confidence in Nigeria’s foreign exchange market.

If this trend continues, supported by higher dollar supply and reduced demand, the local currency may continue to gain against the dollar in the coming months.

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However, challenges remain, including declining foreign reserves and external economic factors that may influence the exchange rate. The CBN’s policies and market dynamics will play a key role in determining the naira’s future performance.

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