Currency rally follows policy shift
On Tuesday the Naira pushed past a key resistance level, trading at N1,487.37 per US dollar in the official market. That marks a modest but clear improvement over Monday’s N1,488.60 rate, according to figures released by the Central Bank of Nigeria (CBN). The move was not limited to the government‑run window – parallel market dealers reported similar strength, suggesting the policy shift resonated across the whole FX landscape.
The backdrop to this rally was the CBN’s recent decision to lower its benchmark interest rate. By trimming the policy rate, the central bank signalled a willingness to ease monetary tightening while still guarding against inflation. Market participants interpreted the cut as a cue that the authority is actively managing liquidity and is confident enough to let the Naira breathe.
Why the Naira is holding up
Several factors helped the currency’s bounce. First, the rate cut reduced the cost of borrowing for banks, which in turn lowered the demand for foreign dollars used to fund short‑term loans. Second, the CBN’s continued intervention in the forex market – buying dollars and selling Naira at strategic levels – has created a floor that supports the local unit. Third, investor sentiment appears to be shifting. Traders who were previously wary of holding Naira‑denominated assets now see a modest upside, prompting them to increase exposure.
Analysts also point to the broader macro‑economic context. Nigeria’s oil revenues have been stabilising after a turbulent period, providing a steadier flow of foreign exchange. At the same time, the government’s efforts to diversify the economy have started to bear fruit, with non‑oil exports picking up modestly. These developments, combined with the central bank’s policy tweak, are feeding a narrative of gradual stabilization.
Data from the CBN’s daily market bulletin shows that demand for the Naira remained robust throughout the trading day. Both importers and exporters reported smoother settlement processes, and the spread between the official and parallel rates narrowed slightly. While the numbers are still far from pre‑crisis levels, the narrowing gap is a positive sign for market confidence.
Looking ahead, market watchers are keeping a close eye on the CBN’s next moves. If the central bank continues to use a balanced mix of interest‑rate policy and targeted forex interventions, the Naira could see further incremental gains. However, any resurgence of inflationary pressure or a sharp drop in oil prices could reverse the hard‑won progress.
For now, the modest appreciation offers a breather for Nigerians who rely on imported goods, as a stronger local currency helps curb the cost of foreign‑priced items. It also provides a small but tangible boost to the purchasing power of households and businesses alike.
