Nigerian investors and top chief executives are betting on the new-found stability of the naira to plan for their firms’ business operations for the year, a condition that’s almost impossible some 12 months ago.
This confidence is building and analysts project that it may last even longer for a currency that has lost 70 percent against the greenback since foreign exchange controls were relaxed in 2023.
“In the last one month or more, we have seen calmness in the market,” said Gabriel Ogbechie, managing director and chief executive officer of Rainoil, one of Nigeria’s biggest integrated downstream oil and gas companies.
“I have always argued that the problem is not what the exchange rate is. But let it be stable so we can plan,” Ogbechie said during a session organised by PwC recently.
After a tumultuous slide 18 months ago, the local currency is finally getting its footing and becoming more predictable, bringing back runaway investor confidence.
Read also: Naira stability cools off imported inflation to five-year low
Its performance since December 2024 gives a glimmer of hope, with the naira holding in a narrow range roughly between 1,550 and 1,520 per dollar.
Positive monetary policy and foreign exchange (FX) directives in the last quarter (Q4) of 2024, combined with muted new flows, have provided the current basis for stability, according to Samuel Sule, CEO of Lagos-based investment bank Renaissance Capital Africa.
“We see this as a positive trend and note the constructive investor interest in Nigerian markets, particularly across domestic fixed income,” he added.
For Rainoil CEO, the stability means “there is no panic” and nobody is getting ‘agitated’ as to what the exchange rate will print the next day.
Analysts have attributed the almost two months of stability to the ongoing reforms embarked on by the CBN, some of which include: the introduction of the Electronics Foreign Exchange Matching System (EFEMS) last December and the FX Code scheduled to be launched by the end of January.
According to Taiwo Oyedele, chairman of Nigeria’s Fiscal Policy and Tax Reforms, the new FX Code introduced by the CBN would enhance transparency and “about $20 million every day is off the market.”
While there seems to be less pressure on the naira and the market is enjoying relative calmness, banks are beginning to reduce their interest rates on foreign exchange (FX) deposits as dollar supply improves.
Read also: Five reasons naira will remain calm in 2025
Olusegun Alebiosu, chief executive officer of First Bank of Nigeria, said this during an executive roundtable event hosted by PwC and BusinessDay, revealing that the CBN returned some FX swaps to some banks in January 2025.
“This move signals that banks now have sufficient FX to return to customers, contributing to a drop in foreign deposit currency rates,” Alebiosu said.
Meanwhile, Olayemi Cardoso, CBN governor, said exchange-rate reforms that have made the naira more competitive present an opportunity to investors.
“We have found ourselves in a situation where the foreign-exchange rate has adjusted,” Cardoso said in a virtual briefing organised by the Nigeria Economic Summit Group (NESG), referring to the naira’s sharp depreciation last year.
The weakening offers investors the chance to ‘take advantage’ of a currency that has become ‘a lot more competitive,’” he said.
Sustaining the just-found position of the naira is the next big, tough task for the Cardoso-led CBN that has continued to assure local and foreign investors of the apex bank’s commitment to transparency, efficiency and price stability.
“Many factors will determine if this calmness is maintained, including 2024 budget performance, the final 2025 budget and its impact on debt sustainability; the rebased GDP and CPI exercises, as well as the global interest rate and commodity price outlook,” Sule said.
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