After months of sharp volatility in Nigeria’s foreign exchange market, recent price movements suggest the naira may be entering a period of cautious stabilisation against major global currencies, particularly the US dollar and the British pound sterling.
At the official market, the naira is currently trading around N1,380 per dollar and approximately N1,837 per pound sterling, while the parallel market rate hovers near N1,415 per dollar. The narrowing gap between official and unofficial rates reflects improving liquidity conditions and a gradual restoration of confidence in the formal market.
A key psychological milestone appears to have been breached in recent weeks, as the pound fell below the N1,900 mark. This development has strengthened sentiment among naira bulls, with the local currency managing to retain a significant portion of its gains against the pound since the start of the year. Market participants increasingly view this level as a turning point in the naira’s recovery narrative.
Much of this renewed stability is being attributed to ongoing reforms led by the Central Bank of Nigeria (CBN). After a turbulent adjustment period, policy measures—including tighter monetary conditions and structural changes in the forex market—are beginning to take effect. These efforts have been reinforced by record-high foreign reserves and a broader push toward disinflation.
From a technical standpoint, the naira’s position against the pound also reflects a more favourable outlook. The currency pair is trading well below its 200-day moving average of N1,915/£, suggesting that, over the longer term, momentum may be shifting in favour of the naira. Still, recent movements indicate that the pound has found a temporary “floor,” entering a phase of sideways consolidation after earlier weakness.
Market charts highlight several critical zones that could determine near-term direction. Resistance is clustered between N1,860/£ and N1,875/£, while a sustained move above this band could trigger a short-term rebound toward N1,900/£. On the downside, support around N1,805/£–N1,807/£ remains a crucial level; a break below it could open the door to further naira gains, potentially pushing the pair toward N1,790/£.
Monetary policy continues to play a central role in shaping these dynamics. The CBN has maintained relatively high interest rates to curb inflation, recently easing the Monetary Policy Rate slightly to 26.5 per cent from its peak. This stance has helped stabilise the currency by attracting capital inflows and reducing speculative pressure.
In contrast, the Bank of England has adopted a “hawkish hold,” keeping its benchmark rate at 3.75 per cent. This policy has supported the pound globally and prevented a sharper decline against the naira, even as Nigeria’s macroeconomic indicators show signs of improvement.
Structural shifts within Nigeria’s financial system are also contributing to the naira’s resilience. Increased forex liquidity in the official market has reduced the parallel market premium to below 2 per cent, a notable improvement from previous levels. At the same time, diaspora remittances have surged significantly, reaching an estimated $600 million per month.
Banking sector reforms have further tightened liquidity conditions. Nigerian banks have collectively raised over N4.6 trillion in fresh capital as part of recapitalisation efforts, while the discontinuation of “Ways and Means” financing has sharply reduced government borrowing. Together, these measures have helped curb excess naira supply—one of the key drivers of past currency weakness.
On the global front, however, uncertainties remain. Rising geopolitical tensions have pushed Brent crude prices above $100 per barrel. While higher oil prices typically boost Nigeria’s revenues, they also contribute to global inflationary pressures, particularly in advanced economies like the United Kingdom. This could prompt the Bank of England to maintain a stricter monetary stance for longer, indirectly supporting the pound.
Meanwhile, the British pound has had a relatively subdued performance in international markets. Despite holding firm during recent trading sessions, it is on track to post modest monthly losses against the US dollar. Risk aversion, driven in part by geopolitical developments and energy market disruptions, has weighed on investor sentiment.
The US dollar, benefiting from its safe-haven status, continues to attract demand. The US Dollar Index (DXY), which tracks the greenback against a basket of major currencies, remains broadly stable near the 100 mark, underscoring the dollar’s resilience in uncertain times.
In all, while external risks persist, Nigeria’s domestic reforms and improving liquidity conditions appear to be laying the groundwork for a more stable naira. Whether this trend can be sustained will depend on continued policy discipline, global market conditions, and the durability of recent economic gains.