The naira is in its longest stretch of stability this year, holding within a narrow band of N1,520–N1,537 per dollar for almost eight weeks, from mid-June to early August.
This comes after a year marked by sharp swings, including a January rally, an April slump, and a May–June recovery.
Market data tracked by Nairametrics shows the exchange rate has moved less than N2–N3 on most trading days in this period, a contrast to the double-digit jumps seen in earlier months.
This stability is particularly notable given the summer holiday season, when demand for foreign exchange typically spikes as Nigerians travel abroad for vacations, education, and shopping.
In addition, several banks have recently announced the availability of naira debit cards for dollar transactions abroad, a move that analysts say has boosted confidence in the ongoing exchange rate reforms under CBN Governor Olayemi Cardoso.
At the start of 2025, the naira strengthened sharply from N1,538.50 to N1,475 per dollar by the end of January.
That rally reversed in March, culminating in the weakest level of the year N1,644/$1 on April 9.
The currency then recovered steadily through May and June, setting the stage for the current period of stability.
Why the naira is holding steady
Analysts point to a combination of global currency trends and domestic policy shifts as the main reasons for the naira’s longest stretch of stability this year:
Weaker US dollar globally: The US dollar index has softened in recent weeks as US inflation data moderated and expectations of interest rate cuts by the Federal Reserve grew. This has eased pressure on emerging market currencies, including the naira, by reducing capital outflows and improving sentiment toward riskier assets.
Rising external reserves: Nigeria’s foreign reserves climbed above the $40 billion mark, the highest in years. This has boosted investor and trader confidence that the Central Bank of Nigeria (CBN) has enough firepower to intervene in the FX market if volatility spikes, providing a psychological backstop against sharp swings.
Lower speculative demand: Arbitrage opportunities between the official and parallel markets have largely diminished, cutting out a major source of artificial demand for dollars. With the profit incentive reduced, only genuine, trade-related FX requests are driving the market.
Clearing of FX backlogs: The CBN has accelerated the settlement of outstanding foreign exchange obligations owed to banks, airlines, and manufacturers. This has freed up market liquidity, reduced uncertainty for importers, and signalled to investors that past policy bottlenecks are being addressed.
Corporate adjustments: Nigerian companies, particularly in manufacturing and services, have adjusted their cash flow structures to rely less on dollar-denominated inputs and liabilities. Many have increased local sourcing, renegotiated payment terms with foreign suppliers, or shifted to phased importation to reduce lump-sum FX demand.
Hawkish monetary policy: Despite a steady fall in headline inflation over recent months, the CBN has maintained a hawkish monetary stance, keeping interest rates high for more than a year. This has tightened naira liquidity, made speculative dollar purchases less attractive, and encouraged short-term capital inflows that support the exchange rate.
For now, traders say the market is balanced, with supply and demand closely matched. The key test will come if oil prices slip, external reserves fall, or the US dollar regains strength, any of which could disrupt the calm.
