On Friday, the Naira appreciated in the official market, trading at N1,492.49 against the Dollar. According to data from the Central Bank of Nigeria (CBN) website, the Naira gained N6.57 against the Dollar on Friday, reflecting a 0.44 per cent increase from Thursday, February 27, when it closed at N1,499.07 to the Dollar.
The local currency had ended Wednesday’s trading at N1,499.11 against the Dollar.
Following CBN reforms aimed at enhancing transparency in the Foreign Exchange (FX) market, the Naira has maintained a relatively stable position.
Analysts have commended the CBN for the steady improvement of the Naira since December 2024.
However, Prof. Jonathan Aremu, a retired CBN Director, cautioned that it may be premature to celebrate this progress. Aremu, a Professor of International Economic Relations at Covenant University and a Regional Expert on Trade and Investment for ECOWAS, stressed the necessity for increased production to sustain the Naira’s gains.
He regarded the currency’s consistent appreciation against the Dollar as a positive sign, stating, “But it may not be time to celebrate yet, as we have witnessed periods of depreciation in the Naira during this time.” He urged the CBN to concentrate on boosting productive activities within the economy to maintain stability.
According to him, the apex bank should extend its focus beyond interest rates and consider other factors influencing production and liquidity.
“The quantity theory of money asserts that the supply of money and population value must balance with price and transaction volume in the economy. If policy solely targets money supply without enhancing transactions, the anticipated appreciation of the Naira will not materialise.”
“The economy requires a higher volume of goods and services. While many goods are available, their prices are determined by supply and demand. Solely concentrating on monetary policy is insufficient; there must be a greater emphasis on increasing production,” he added.
He noted that expanding production will further decrease the value of foreign currencies, thereby strengthening the Naira. Aremu observed that the depreciation of foreign exchange is partly due to consumers being unable to afford purchases amidst challenging economic conditions.
“The CBN should not only focus on reducing money supply but also on ensuring the availability of quality goods and services,” he said.
Additionally, Cordros Securities in its weekly economic update on Friday attributed the Naira’s appreciation to a reduction in demand pressure, despite declining foreign exchange (FX) reserves. The report indicated that FX reserves fell by $241.50 million week-on-week to $38.46 billion as of February 27, marking the seventh consecutive week of decline.
“We anticipate that FX liquidity will remain robust as a more efficient market and improved confidence continue to support inflows from autonomous sources,” the report stated. “The CBN is also expected to intervene during periods of high volatility, ensuring the Naira remains stable in the near term,” it concluded.
