Currency traders have attributed the recent performance of the naira and the relative stability of the foreign exchange (forex) market to the excess dollar supply and the activities of the security agencies against forex speculators and hoarders.
They listed other factors contributing to the good performance of the local currency, including the effectiveness of the Central Bank of Nigeria (CBN) in implementing its policies, enhanced fiscal buffers, investors’ confidence, a favorable balance of payments position, higher foreign inflows, positive market sentiments, and others.
The forex market has been relatively stable, with the naira showing signs of recovery and appreciating at the parallel market to N1,535/$1 on Tuesday, July 29, 2025, from N1,580/$1 as of July 1, 2025.
This improvement reflects renewed investor confidence and ongoing interventions by the CBN to stabilize the currency.
Some analysts believe that the uptick in the naira value indicates a positive market response to the CBN’s ongoing reforms and monetary tightening measures.
Limited access to foreign exchange has been one of the biggest challenges facing the Nigerian economy. This constraint often forced businesses and travelers to rely on the parallel market for their foreign exchange needs, creating arbitrage opportunities that fueled speculation and further destabilized the system.
In reaction to this, the CBN introduced a series of reforms to attract foreign capital, stabilize prices, and restore confidence in the exchange rate regime.
These coordinated measures have begun to yield positive results with an increasing external reserve and access to forex through the official market, which has significantly improved.
With improved dollar liquidity, Nigerian banks have lifted the more than three-year moratorium on the use of naira-funded debit cards abroad. This has also led to significant appreciation of the naira against the dollar and other global currencies.
The licensed currency traders in Lagos and Abuja have revealed that there has been an improved dollar supply at the official window with the convergence of the rates between the Nigerian Foreign Exchange Market (NFEM) and the parallel market.
Forex supplies exceed supplies
In an exclusive chat with Nairametrics, the President of the Association of Bureau De Change (BDC) operators, Aminu Gwadebe, acknowledged that the forex market has been stable recently, with supply exceeding demand.
He attributed the current strength of the naira and stability in the forex market to the effectiveness of the CBN’s policy reforms, commodity price stability, fiscal discipline, and stoppage of ways and means.
He said, ‘’The forex market is stable, supply outstrips demand, policy reforms effectiveness, fiscal discipline, and stoppage of ways and means, commodities price stability, all culminating factors for the local currency’s new strength and stability. The velocity of volatility remained mean and moderate at the current exchange rate.
‘’It is also germane to note the contributions of other agencies like EFCC, NFIU, on their various sensitizations and workshops targeting specific tasks in human capital development of financial institutions, other financial institutions, and the General members of the public.
‘’It is a bouquet of hard work from stakeholders, regulators, security agencies, operators, and the Fiscal authorities.’’
Factors driving better Naira performance
Giving further insight into the major driving forces behind the forex market stability and better performance of the naira, Gwadebe said, ‘’I have mentioned them as follows: supplies outstrips demand and is natural for the exchange of the naira against the greenback to appreciate, CBN Policies implementation effectiveness, fiscal discipline, higher foreign inflows, fiscal discipline, investors’ confidence, increase balance of payment position, lesser speculation and hoarding through security agencies roles, collaboration between the regulators, security agencies and operators.’’
On where most of these forex supplies are coming from, the ABCON boss listed them to include: Increased diaspora remittances, enhanced fiscal buffers, positive market sentiments, political activities, higher balance of payments positions through foreign loans, and receipt of oil proceeds.
This is also aided by stakeholders’ collaborations, regulators, and security agencies.
Gwadebe noted that overall, there is sustained confidence among investors and Nigerians in the local currencies. He pointed out that illegal activities of speculation, hoarding, fictitious, and currency substitutions have drastically and inorganically reduced, thereby making the naira a stronger store of value.
Speculators getting scared
Making his contribution, a BDC operator, Abubakar, said there has been much supply into the market in recent weeks, adding that many people don’t see the need to hold, keep, or hoard the dollar.
He also said people may be a bit scared to keep the dollar for speculative purposes.
Abubakar said, “There has been much supply into the market in recent weeks. Many people don’t see the need to hold, keep, or hoard the dollar anymore.”
“People may even be a bit scared to keep the dollar for speculative purposes,” he added.
Another BDC operator who wished to remain anonymous said the recent positive growth projections by the likes of Fitch or Moody’s may be responsible for this.
He said the black market has been doing even better than the official market in recent weeks.
He said, “The recent positive growth projections by agencies like Fitch and Moody’s may be responsible for this.
“In fact, the black market has been doing even better than the official market in recent weeks’’
What you should know
The positive market reforms started by the CBN are evident in the alignment between the official exchange rate and the parallel market exchange rate.
- These reforms, which led to more parity between official and unofficial market rates, were intended to attract capital flows.
- Nigeria’s rapid improvement within the foreign exchange market mechanism, coupled with ongoing carry trade activities, has fundamentally shifted investor perceptions of the country, leading to increasing capital inflow.
- This has also enhanced the performance of naira-denominated bonds after a prolonged period of stagnation, with an 8.6% gain in July alone. These bonds rank first out of 23 countries on the Bloomberg EM Local Currency Government Universal Index, reflecting excellent and stable results throughout the year.
Bloomberg data shows that the Nigerian currency’s 30-day historical volatility decreased from 23% in December to 4.6% currently. The CBN maintained the benchmark rate at 27.5%, while inflation declined to 22.2% for the third consecutive month in June .
