The Nigerian naira posted decent gains against the American dollar on the parallel foreign exchange market during the mid-week trading session, amid ongoing improved market sentiments in Nigeria’s capital market.
Currency traders exchanged the naira at an average rate of N1,515 on Wednesday, up from N1,520/$ on Monday, representing a gain of N5 within a single day.
The changing dynamics in Nigeria’s foreign exchange market can be partially attributed to the CBN’s ongoing reforms.
The Electronic Foreign Exchange Matching System (BMatch), which was implemented in December 2024, is one of the major policy changes credited with the naira’s recovery.
This CBN-backed platform, using Bloomberg’s BMatch system, ensures more transparency and effective price discovery in the FX market by allowing authorized dealers to place anonymous orders into a central limit order book.
The system has tamed exchange rate swings by reducing market distortions and providing the CBN with better supervision.
Consequently, the Nigeria Foreign Exchange Code introduced by the CBN in January 2025 further amplified market stability. The monetary rule set guidelines for ethical behavior, governance, execution, information exchange, risk management, and settlement procedures in the FX market. Investor confidence has increased due to these reforms, which bring Nigeria’s FX market into line with international best practices.
U.S. Dollar Still Commands Haven Credentials Amid Trump’s Tariffs Threat
Market jitters increased amid the most recent round of U.S. elections, and safe-haven currencies, including the dollar and yen, gained on Wednesday. U.S. President Donald Trump’s tariff threats and tense negotiations over the conflict between Russia and Ukraine were key drivers.
- The minutes from the most recent Federal Reserve policy meeting revealed that Trump’s initial policy proposals raised concerns about higher inflation, causing the dollar to decline further against the yen.
- Additionally, the minutes confirmed a prolonged hold on rate cuts. Overall, the greenback increased in value relative to other currencies like the euro and sterling, which investors tend to purchase when their risk tolerance is high.
- Trump’s remarks late Tuesday, in which he announced plans to impose auto tariffs “in the neighborhood of 25 percent” and similar duties on imports of semiconductors and pharmaceuticals, propelled those gains. Trump stated on Friday that the car taxes would be implemented as early as April 2, the day after cabinet members are expected to present him with reports detailing their options for various import taxes.
- The dollar index rose by 20 basis points to 107 points last week, after falling 1.2 percent the previous week.
Meanwhile, higher-than-expected UK inflation surged to a 10-month high of 3 percent in January and is expected to continue to rise, briefly boosting the pound. Although it last traded at $1.2585, sterling reached a two-month high overnight.
After an initial meeting that did not include Kyiv, the Trump administration announced on Tuesday that it had agreed to continue talks with Russia on ending the war in Ukraine. This marked a shift from Washington’s previous strategy, which rallied U.S. allies to isolate Russian President Vladimir Putin.
Trump struck back at Ukrainian President Volodymyr Zelensky on Wednesday. Trump implied that Ukraine was behind Russia’s full-scale invasion in 2022, and Zelensky retaliated by saying the Russian disinformation had ensnared the president. Trump criticized Zelensky as “a dictator without elections” and warned that he must act quickly to bring about peace or risk losing his nation.
