This growing confidence is encouraging, and analysts believe it could stick around for a while, especially since the currency has dropped 70 percent against the dollar since the foreign exchange controls were eased in 2023, which included two devaluations.
Gabriel Ogbechie, the managing director and CEO of Rainoil, one of Nigeria's largest oil and gas companies, noted, “In the last one month or more, we’ve seen calmness in the market.”
He added, “I’ve always argued that the problem is not what the exchange rate is. But let it be stable so we can plan” during a session hosted by PwC last Thursday.
After a rough patch 18 months ago, the naira is finally stabilizing and becoming more reliable, which is helping to restore investor confidence.
Since December, the currency has shown some promise, trading within a narrow range of about 1,550 to 1,520 per dollar.
According to Samuel Sule, CEO of Lagos-based investment bank Renaissance Capital Africa, recent positive monetary policies and FX directives, along with limited new flows, have laid the groundwork for this stability.
“We see this as a positive trend and note the constructive investor interest in Nigerian markets, particularly across domestic fixed income,” he added.
Rainoil's CEO believes that stability means there's no reason to panic, and people aren't getting worked up about what the exchange rate will be tomorrow.
Analysts point to nearly two months of stability being linked to the ongoing reforms by the CBN, including the launch of the Electronics Foreign Exchange Matching System (EFEMS) last December and the FX code set to roll out by the end of January.
Taiwo Oyedele, who chairs Nigeria’s Fiscal Policy and Tax Reforms, mentioned at a PwC event that the new FX code from the CBN will boost transparency and keep about $20 million a day off the market.
With the naira facing less pressure and the market enjoying a bit of calm, banks are starting to lower their interest rates on foreign exchange (FX) deposits as the supply of dollars improves.
Olusegun Alebiosu, CEO of First Bank of Nigeria, shared during a roundtable event hosted by PwC and BusinessDay that the CBN had returned some FX swaps to certain banks in January 2025.
Alebiosu mentioned that this action indicates banks now have enough foreign exchange to give back to customers, which is leading to a decrease in foreign deposit currency rates.
On the other hand, CBN governor Olayemi Cardoso pointed out that the recent exchange-rate reforms have made the naira more appealing to investors.
“We’ve found ourselves in a situation where the foreign-exchange rate has adjusted,” Cardoso stated during a virtual briefing hosted by the Nigeria Economic Summit Group (NESG), referencing the naira's significant drop last year.
This decline gives investors a chance to “capitalize” on a currency that’s become “much more competitive,” he added.
The next big challenge for Cardoso and the CBN is to maintain the naira's newfound position, as they continue to reassure both local and foreign investors of the central bank’s dedication to transparency, efficiency, and price stability.
Sule noted that several factors will influence whether this stability can be sustained, including the performance of the 2024 budget, the final 2025 budget and its effects on debt sustainability, the rebased GDP and CPI exercises, as well as the global interest rate and commodity price trends.