By the end of the month, the local currency had strengthened by 1.42 per cent, appreciating by N19.67 to settle at an average spot rate of N1,361.51/$ compared with N1,381.18/$ in March. The movement, while not dramatic, signalled a calmer trading environment after weeks of volatility earlier in the quarter.
CBN Steps Up Liquidity Control With Trillions in OMO Sales
A key driver behind the improved FX stability was the CBN’s intensified use of Open Market Operations (OMO) to manage liquidity conditions in the financial system.
During April, the apex bank issued OMO bills worth N9.71 trillion, marking a significant jump from N7.62 trillion in March—an increase of 27.37 per cent or N2.09 trillion. The scale of issuance underscored a deliberate push to absorb excess liquidity and reduce pressure on the naira amid persistent inflation concerns.
Market data suggested that these interventions helped reshape trading dynamics, particularly by encouraging more disciplined demand for foreign exchange.
Narrower Trading Bands Signal Calmer Market Conditions
The FX market also reflected reduced turbulence, with exchange rate movements becoming more contained compared to the previous month. In April, the naira traded within a relatively tighter band of N1,341.01/$ to N1,389/$, a notable improvement over March’s wider range of N1,345.00/$ to N1,425/$.
This narrowing spread was widely interpreted as a sign of improving confidence and reduced speculative positioning in the market. Traders appeared less inclined to bet against the currency, as liquidity conditions became more predictable.
Analysts Point to Restored Confidence and Policy Impact
Financial analysts largely attributed the improved stability to the CBN’s sustained liquidity tightening and evolving market transparency measures.
Cordros Capital observed that policy direction was playing a central role in shaping investor behaviour. In their words, "said the surge in OMO bill issuance was an indication of the apex bank’s commitment to maintaining tight liquidity conditions to contain inflation and stabilise the foreign exchange market."
They further noted that the elevated yields on these instruments continued to attract portfolio inflows into fixed-income securities, which in turn helped improve dollar supply in the system.
Improved Transparency and Investor Sentiment
Cowry Asset Management also highlighted the combined effect of liquidity sterilisation and market reforms on exchange rate behaviour.
“Also, Cowry Asset Management said the combination of aggressive liquidity sterilisation and improved transparency in the FX market contributed significantly to the moderation in exchange rate volatility.
According to them, the narrowing gap in exchange rate movements indicates that policy measures introduced by the monetary authority are gradually restoring confidence among foreign investors and local market participants.”
Their assessment pointed to a gradual rebuilding of trust in the FX framework, especially among portfolio investors who had previously adopted a cautious stance.
FX Outlook Hinges on Inflows and Economic Fundamentals
While the recent stability has been welcomed, some analysts caution that sustaining it may prove more challenging without stronger foreign exchange inflows.
Comercio Partners captured this concern clearly, noting that “the improved stability of the naira reflected easing panic demand in the FX market as liquidity conditions improved.
However, they warned that sustaining the current momentum would depend heavily on the country’s ability to generate stronger and more consistent foreign exchange inflows from oil exports, diaspora remittances and foreign direct investments.”
Their outlook suggests that while policy tightening has delivered short-term gains, longer-term stability will depend on structural improvements in Nigeria’s external earnings base.