Foreign exchange traders in the street market quoted the dollar at N1,390 on Wednesday morning, reflecting a N10 appreciation from the N1,400 recorded a day earlier. The movement represents a 0.7 per cent gain and marks a rebound after two consecutive days of losses in the parallel segment.
The recovery comes amid recent volatility across both official and unofficial foreign exchange windows. In the official market, the currency extended its slide on Tuesday, weakening by N6.13 to close at N1,355.37 per dollar, compared to N1,349.24 on Monday at the Nigerian Foreign Exchange Market (NFEM) window — a 0.5 per cent depreciation.
Market watchers had attributed the earlier pressure on the naira largely to a slowdown in weekly foreign exchange inflows, which tightened liquidity and weighed on sentiment. The currency had recorded losses for five straight trading sessions in the official window before the modest recovery in the parallel market.
Explaining the rationale behind the policy shift, CBN Governor Olayemi Cardoso said members of the Monetary Policy Committee opted for a cautious easing of the Monetary Policy Rate (MPR) to 26.5 per cent. He noted that nearly a year of moderating inflation, improved macroeconomic indicators and stronger foreign exchange buffers created space for a measured adjustment.
Analysts say the impact of the rate cut will depend largely on sustained FX liquidity and the stability of external reserves. Lukman Otunuga, senior market analyst at FXTM, described the move as potentially supportive of the naira, which has gained roughly 6 per cent since the start of the year.
According to him, improved foreign exchange liquidity and a recent rise in reserves — reported to be at a 13-year high — could help anchor investor confidence. He added that despite the rate cut, Nigeria’s real interest rates remain elevated when adjusted for inflation, while the country still maintains one of the highest benchmark rates in Africa, factors that may continue to attract foreign portfolio investment.
From the fixed income perspective, Adebowale Funmi, Head of Research at Parthian Securities, suggested that the adjustment may have only a modest effect, as markets had largely anticipated a policy easing.
She, however, cautioned that developments in the global oil market remain a significant variable. A sustained drop in crude prices could widen Nigeria’s fiscal deficit and increase government borrowing requirements, potentially influencing future interest rate decisions. Maintaining yields at investor-attractive levels, she noted, may remain necessary to support government financing needs.
While the naira’s rebound in the parallel market reflects short-term optimism, analysts emphasise that lasting stability will hinge on consistent foreign exchange inflows, prudent monetary management and favourable trends in the external sector. As Africa’s largest economy continues to navigate a delicate policy balancing act, oil receipts and reserve strength are likely to remain decisive factors in the currency’s trajectory.