The naira is making steady progress in the foreign exchange market, appreciating toward a key monthly support level at N1,440 as it benefits from broad dollar weakness.
This shift builds on a bearish stretch earlier in the year, when the naira spiked to N1,600 in April after consecutive depreciation pressures from February, before staging a steady recovery.
The recovery gathered momentum in May and has so far held firm, with the currency trading around N1,488 in mid-September, more than 7% stronger and comfortably below the N1,500 mark.
As September draws to a close, analysts expect the naira could break toward the N1,440 support zone, reflecting its resilience and ability to benefit from dollar weakness.
In the same vein, the pattern is playing out across other African currencies. Ghana’s cedi has rallied more than 13% from April’s close, while South Africa’s rand is up over 6%, both making the most of the dollar decline.
Extending beyond Africa, pressure on the dollar has become a global story, with the U.S. currency slipping to a four-year low against the euro on Tuesday, reflecting the depth of its weakness.
Dollar weakness
The dollar fell sharply across the board on Tuesday, sliding to a four-year low against the euro as investors increased bets on a Federal Reserve rate cut this week.
The euro rose 0.9% to $1.1867, its strongest level since September 2021, as it heads for another positive close this month against the dollar, putting it on track to finish in the green every month so far in 2025 except July.
After finding some stability in July following a steep drop earlier in the year, the dollar has come under renewed selling pressure.
- Expectations of another Fed rate cut, along with fresh calls from President Donald Trump for more aggressive monetary easing, have weighed heavily on the currency.
Markets are now widely anticipating a 25-basis-point cut on Wednesday, with worsening labor market data fueling the urgency for policy action.
So far this year, the dollar index has fallen more than 10%, giving currencies tied to the greenback an opportunity to strengthen.
Naira takes advantage
In an exclusive chat with Nairametrics, Zeal Akaraiwe, CEO of Graeme Blaque Advisory, pointed to structural reforms as the foundation of the naira’s recovery.
“We have to understand the impact of the market initiatives that started last year to strengthen the fundamental foundation of the FX market, which culminated with the launch of the BMatch system as well as the FX Code,” Akaraiwe said.
On Drinks & Mics, a financial talk show hosted by Ugo Obi-Chukwu, CEO of Nairametrics, finance experts, including Biodun Fagbolu (former CEO of CSL Stockbrokers), Tunji Andrews (CEO of Awabah), and Arnold Dublin-Green (Chief Investment Officer of Cordros Capital Ltd), highlighted policy actions and changing consumer behavior as major drivers of the naira’s recent gains.
Biodun Fagbolu noted that the turnaround could not be separated from policy choices. “I think from a demand and supply point of view, there’s transparency in the FX markets. We’ve seen a lot of inflows on the OMO. Oil production has increased. On the supply side, Nigerians have also changed their consumption habits,” he said.
The experts all agreed that for the naira to sustain its gains, the government must ensure transparency in the FX market, uphold fiscal discipline, boost oil and non-oil revenues, and strengthen local industries.
