The naira has been relatively unscathed as the United States dollar surged to a two-year high against major global currencies on Monday, continuing its strong performance after an impressive jobs report on Friday.
The naira has been fairly stable against the US dollar this year in contrast to peer currencies.
It ended the first trading week of 2025 on a flat note, signalling an ease of pressure that previously weighed on the foreign exchange market.
According to data from the Central Bank of Nigeria (CBN), the naira began the year at an official exchange rate of N1,538.50 per dollar on January 2, 2025. By the end of the first trading week, it had slightly depreciated to N1,544.50 per dollar, reflecting a marginal decline of 0.4 percent.
On Monday, the naira closed at N1,550 per dollar, losing just 0.35 per cent compared to N1,544.50 on Friday at the Nigerian Foreign Exchange Market (NFEM).
Authorised currency dealers quoted the dollar at the highest rate of N1,550 on Monday from N1,548 quoted on Friday. The market stood at N1,543 per dollar on Monday as against N1,538/$ on Friday.
The naira traded steadily within the range of N1,655 and N1,665 in the parallel market, commonly referred to as the black market, on Monday. This stability contrasts with the performance of many other emerging-market currencies, which have struggled against the dollar’s renewed strength.
The Mexican Peso was quoted at 20.80 per dollar on Monday as against 20.419/$1 seen between January 1 to 8, 2025.
Similarly, the South African rand traded at ZAR19.09/$1 on Monday from ZAR18.93/$ on January 10, 2025 and ZAR18.90/$1 on January 9, 2025. The Chinese Yuan Renminbi was quoted at 7.33/$ on Monday 7.29 on January 2 and 3, 2025.
Read also: Naira steadies in first trading week
Meanwhile, the US dollar’s rally continued unabated, driven by expectations of robust economic growth in the United States relative to its global peers.
Reuters reported that the dollar reached its highest level in two years on Thursday, the first trading day of 2025. This performance builds on last year’s gains, underpinned by the Federal Reserve’s monetary policy stance and broader economic trends.
Reserve Bank’s cautious approach
The Federal Reserve has signalled its intent to adopt a cautious approach to cutting interest rates, given that inflation remains stubbornly above its 2 percent annual target. The resilience of the US economy further supports the outlook, with market participants expecting interest rates to remain relatively elevated.
Inflows, EFEMS’ impact
Ayokunle Olubunmi, head of financial institution ratings at Agusto Consulting, said the inflows by Nigerians visiting during the yuletide have helped the currency.
Similarly, the CBN has increased supply to the foreign exchange market
Ayodele Akinwunmi, who serves as a senior relationship manager at FSDH Merchant Bank, said the market now remains well supplied and transparent with the new trading platform the CBN introduced.
The naira has maintained relative stability in the foreign exchange market, bolstered by inflows from the Nigerian diaspora returning home for the Christmas season, proceeds from a recent Eurobond issuance, and enhanced market transparency introduced by the Central Bank of Nigeria (CBN).
The stability in the naira has also been attributed to the CBN’s implementation of the Electronic Foreign Exchange Matching System (EFEMS), which has improved transparency and efficiency in FX trading.
Charlie Robertson, head of macro strategy at FIM Partners UK Ltd, noted that the naira’s performance may also be influenced by proceeds from Nigeria’s recent Eurobond issuance and the seasonal increase in dollar inflows from the diaspora.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the transparency brought about by the EFEMS platform. He explained that clearer information on supply and demand has reduced information asymmetry and made demand more realistic. Yusuf also emphasised the importance of CBN interventions and rising external reserves, which have bolstered investor confidence and mitigated panic.
According to CBN data, external reserves stood at $40.75 billion as of January 10, 2025.
In a move aimed at tightening the management of foreign exchange, the CBN last week announced that it would no longer approve requests for the extension of repatriation of export proceeds by authorised dealers on behalf of their customers.
The decision, which is effective immediately, was disclosed in a circular signed by W.J. Kanya, acting director of the Trade and Exchange Department.
Also last week, the CBN introduced two specialised accounts—the Non-Resident Nigerian Ordinary Account (NRNOA) and the Non-Resident Nigerian Investment Account (NRNIA)—in a strategic move to enhance liquidity and increase diaspora contributions to Nigeria’s economic growth.
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