The naira is rising, just like Türkiye’s lira before it crashed

Nigeria’s currency is making a comeback, and the world is watching. After months of turmoil, the Naira, once in free fall, is now showing signs of stability.

Foreign investors are pouring billions into Nigeria’s debt market, strengthening the exchange rate from N1,694 per US dollar to around N1,500.

But is this a real recovery—or just another fragile moment? Türkiye faced a similar boom—and then a devastating crash. Can Nigeria avoid the same fate?

“Global oil prices fluctuate, and Nigeria has been here before—booming when oil prices rise, only to crash when they fall.”

Foreign investors are back—But for how long?

Since September, foreign investors have pumped $4 billion into Nigeria’s debt market, according to Renaissance Capital Africa (RCA). This inflow has boosted the Naira and restored some confidence in the economy.

The government’s 2023 economic reforms—scrapping fuel subsidies and loosening foreign exchange controls—have made Nigeria more attractive to investors looking for high returns.

Nigerian bonds currently offer yields of 18.80 percent, making them some of the most attractive in the world. But there’s a catch: What happens when these investors decide to leave? Türkiye faced the same scenario—billions of dollars flowed in, only to disappear when confidence waned.

Türkiye’s hard lesson: An overvalued currency means trouble

Türkiye once looked like an economic success story. The Lira was strong, investors were pouring in, and the country seemed to be on a solid growth path. But behind the optimism, the currency was overvalued by 33 percent. When reality hit, investors pulled out, and the Lira crashed.

Is Nigeria at risk of following the same path? According to RCA, the Naira is overvalued by 20 percent, making it vulnerable. Inflation has fallen from 34.8 percent to 24.48 percent in January 2025 due to rebasing, but it remains high. A strong Naira means little if the cost of living keeps rising.

However, not everyone agrees with this outlook. Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, argues that the Naira is still undervalued. “I do not think that N1,500/$ is the fair value of the Naira. I think the Naira is undervalued,” he said.

This aligns with Philip Bakare, a deals advisor at one of Nigeria’s Big Four accounting firms, who argues that transparency in the FX market is critical for the fair value of Naira to be known.

He believes structural reforms and increased transparency in foreign exchange markets could stabilize the currency and improve liquidity.

Read also: Naira to maintain stability on CBN intervention

Can oil keep Nigeria afloat?

Nigeria’s oil production is rising, hitting 1.539 million barrels per day in January 2025, up from 1.485 million in December 2024, according to OPEC data. The Dangote refinery is also expected to reduce fuel imports, saving billions in foreign reserves.

But relying too much on oil is risky. Global oil prices fluctuate, and Nigeria has been here before—booming when oil prices rise, only to crash when they fall. If oil revenues drop, can the economy withstand the shock?

The mistakes Türkiye made—And what Nigeria must avoid

Türkiye’s downfall was fueled by government interference in economic policies. The central bank manipulated interest rates, trying to control inflation while keeping borrowing costs low. The result? Investors lost confidence, the economy spiraled into crisis, and the Lira collapsed.

Nigeria must not fall into the same trap. If the government artificially props up the Naira or cuts interest rates too soon, it risks spooking investors and creating further instability. Clear, stable, and transparent policies are essential to maintaining long-term confidence.

An expert has also warned that lowering interest rates before fully controlling inflation could backfire, distorting the market and undoing recent economic gains.

Nigeria’s defining moment

Nigeria stands at a crossroads. One path leads to real economic growth—built on strong policies and long-term investment. The other leads to Türkiye’s boom-and-bust cycle, where foreign money floods in fast but disappears just as quickly.

The next few months will be critical. If Nigeria sticks to smart economic policies, controls inflation, and strengthens key industries, this recovery could become sustainable. If not, today’s gains could vanish overnight—just like in Türkiye.

The real question isn’t whether Nigeria can attract investors—it already has. The test now is whether it can keep them.

Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).