Nigeria’s currency has recorded its strongest showing in more than 18 months at the official foreign exchange window, offering a measure of short-term relief to policymakers and businesses grappling with prolonged currency instability.

Data from the Central Bank of Nigeria (CBN) shows the naira strengthened to N1,394 per dollar on Wednesday at the Nigerian Foreign Exchange Market (NFEM), its best level since May 2024. The gain represents a sharp appreciation from Tuesday’s close of N1,409.5/$ and marks a notable reversal after weeks of volatility at the official market.

Market analysts say the move reflects improving liquidity conditions and the impact of recent FX reforms, which appear to be providing temporary support to the local currency. The rebound has fueled cautious optimism that the official market may be stabilising after months of erratic swings.

However, the optimism is tempered by persistent distortions elsewhere in the FX system.

While the naira firmed at the official window, the parallel market continues to trade at significantly weaker levels, highlighting uneven confidence across the broader foreign exchange ecosystem. On Wednesday, the naira exchanged at N1,490 per dollar on the street market, marginally stronger than the previous day but far from matching official gains.

This divergence has pushed the gap between official and parallel rates to N96, the widest spread since early February 2025, according to market data. The widening differential underscores ongoing unmet FX demand outside official channels and suggests that speculative pressures remain active in the informal market.

The naira’s appreciation also coincides with a period of global US dollar weakness, which has provided external support for emerging and frontier market currencies. The dollar has slipped to its lowest levels since early 2022 amid investor concerns over US economic prospects and trade policy uncertainty. US President Donald Trump recently played down fears over the dollar’s decline, describing its value as “great.”

Despite the improved official rate, analysts caution that structural challenges remain unresolved, including constrained FX supply, lingering confidence issues, and the persistent disconnect between official and informal markets.

For now, the naira’s move to N1,394/$ offers a welcome pause from recent pressures but whether it marks the start of a sustained recovery or a temporary reprieve will depend on how quickly broader FX market imbalances are addressed.

Source: Nairametrics