Naira gains stability, but don’t celebrate yet?

After years of turbulence, the naira has found some footing. But is this the beginning of real stability—or just another lull before the next crash?

The exchange rate, which once plunged to N1,900, rebounded to N1,300 at its strongest point last April before settling around N1,500. Optimists see this as a sign that reforms are working. Sceptics aren’t convinced.

“There’s nothing to celebrate,” says Ayo Teriba, CEO of Economic Associates. The currency may be steadying, but its true strength is far from restored.

A battle is playing out between hedgers, speculators, and policymakers. And while the government tries to hold the line, old habits die hard.

Read also: Naira stabilises at N1,500 in black market despite declining reserves

For a decade, hoarding dollars has been Nigeria’s most lucrative business—outperforming any legal venture. In 2015, a dollar traded for N197.

Today, it hovers between N1,500 and N1,600, enriching rent-seekers who built fortunes not through production or innovation but by exploiting market distortions.

Even as recently as 2022, the exchange rate stood at N411/$. Three years later, the naira has lost nearly four times its value.

With this kind of volatility, can anyone seriously expect long-term investments in agriculture, manufacturing, or industry? Some will take the risk. Most will sit back, hoard dollars, and let their wealth grow without lifting a finger.

This culture of speculation has deep roots. Now, as the naira steadies, the next battle emerges. Speculators are watching for cracks in the policy framework—betting that instability will return and hand them another payday.

The current stability has been driven by a mix of policy interventions, improved dollar inflows, and tightened monetary controls.

The Central Bank of Nigeria (CBN) has reined in excess liquidity, reducing pressure on the exchange rate. Increased diaspora remittances and stronger foreign reserves have also provided some breathing room. But these measures only go so far.

Read also: How Nigeria can sustain rare naira rally

Nigeria’s foreign exchange market is still fragile, and any misstep could reignite instability. The government’s ability to sustain stability depends on structural reforms that go beyond firefighting tactics.

A deeper shift is needed—one that reduces Nigeria’s dependence on imported goods, expands export earnings, and restores confidence in the economy.

Oyekan Idris, a capital market analyst, believes the key lies in boosting non-oil exports and ensuring foreign currency repatriation flows through official channels. “When supply outpaces demand, the naira can strengthen,” he says.

Philip Bakare, a deals advisor at one of Nigeria’s Big Four accounting firms, argues that transparency in the FX market is critical. “The lack of transparency has led to market distortions and instability,” he says, calling for the consolidation of multiple FX windows into a single, unified rate.

A transparent, rules-based system could restore confidence in the naira. But without deeper reforms, this moment of calm could prove fleeting.

For years, Nigeria has relied on oil earnings to prop up the naira. But with global energy transitions and increasing competition, oil alone can no longer sustain the economy. Diversification is critical.

The government must create an environment where investment in manufacturing, agriculture, and technology is more attractive than hoarding dollars, experts say.

“Policies that encourage domestic production, reduce import dependency, and support local businesses will be key. Without this shift, the economy will remain vulnerable to currency shocks.”

In the short term, the naira’s stability is a welcome relief for businesses and households struggling with rising costs. But policymakers cannot afford to be complacent.

Speculators are waiting. If reforms stall, if foreign reserves weaken, or if confidence dips, another wave of volatility could hit.

Read also: Naira gains against pound, euro, Canadian dollar since EFEMS

Nigeria has an opportunity to break the cycle. But that will require discipline, transparency, and a long-term commitment to economic transformation. “Otherwise, today’s stability may prove to be just another illusion,” Umar Faruk, an economist, concluded.