In the past week, the value of Nigeria’s currency, the naira, improved significantly against the United States dollar. Specifically, the naira appreciated by N137.69, with its value going from N1,672.69 per dollar at the end of November 2024 to N1,535 per dollar by December 6, 2024. This change reflects a rise of about 8.24%, which some business leaders agree is a positive development for Nigeria’s economy.
The main reason for this improvement is the Central Bank of Nigeria’s (CBN) new foreign exchange platform, which was introduced to make currency trading more transparent and efficient. This new system allows for better management of the currency market and is expected to reduce the differences between the official exchange rate and that of the parallel (or black) market, leading to a more stable naira.
Throughout the week, the value of the naira fluctuated daily. For example, on December 2, it was valued at N1,660 to the dollar, with variations hitting a peak of N1,678 and dropping as low as N1,650. By the following days, the exchange rate continued to improve, reaching N1,608 and then N1,567 before closing the week at N1,535. The CBN has mandated that banks use a specific trading system called Bloomberg BMatch to improve the efficiency and transparency of foreign currency trades, making the entire process easier to follow.
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One of the key outcomes of the new platform is that it has encouraged more activity in the foreign exchange market, improving the availability of foreign currency. Alongside these initiatives, Nigeria also recently returned to the international bond market, successfully raising over $2 billion, which has helped boost confidence in the economy and increased the availability of foreign currency.
Despite the positive changes, experts in the private sector stressed the importance of maintaining this upward trend in the naira’s value. Dr. Muda Yusuf, an economist, expressed his approval of the recent gains but pointed out that sustainable growth requires careful handling of the country’s finances. He highlighted that government spending, debt levels, and fiscal deficits need to be managed well so as not to undermine the naira’s strength.
Similarly, Adeyemi Oyerinde, the Director-General of the Nigeria Employers’ Consultative Association, noted that the naira’s appreciation is particularly welcomed by businesses that rely on importing materials that cannot be produced domestically. He mentioned that sustaining this positive trend will require the government to focus on increasing crude oil production for export and improving overall financial management.
In summary, the naira’s recent appreciation against the dollar marks an encouraging shift for Nigeria’s economy, driven largely by new strategies from the Central Bank and increased foreign investment. However, for this improvement to last, careful attention must be given to fiscal policies and government spending.
