•Appreciates to N1540/$ on parallel market

Emmanuel Addeh in Abuja and NumeEkeghe in Lagos with agency report

The Naira appears to be breaking away from the price of oil, the nation’s main foreign-exchange earner, a mark of growing confidence in the nation’s economy.

This was as the naira gained marginally on the parallel market yesterday to close at N1,540 to a dollar, stronger than the N1560 to a dollar it closed the previous day.

On the other hand, the nation’s currency however depreciated marginally to close yesterday at N1,530.50 to a dollar on the official Nigerian Foreign Exchange Market (NFEM), compared with the N1,528 to a dollar it closed the previous day.

The naira has traded within a relatively narrow band of N1,520/$ to N1,565/$ on the official window over the past month, while on the parallel market it hovered above N1,600 for much of June.

However, since the beginning of July, the currency has appreciated, trading below the N1,600 threshold on the parallel market.

This, analysts noted, reflects a period of relative calm in the foreign exchange market, supported by improved forex  liquidity and the gradual reactivation of naira debit cards for international transactions by several commercial banks.

President Bola Tinubu’s currency reforms have marked one of the most significant shifts in Nigeria’s economic policy in recent years. Upon taking office, Tinubu moved quickly to unify the country’s multiple exchange rates, effectively dismantling the long-standing system of parallel currency markets.

According to Bloomberg, the bold step was aimed at creating transparency, improve investor confidence, and curb the arbitrage that had distorted the foreign exchange landscape for years.

In addition to unifying the exchange rate, the government allowed the naira to float more freely, letting market forces determine its value. This move, though initially leading to volatility and a sharp depreciation of the currency, was seen by many as a necessary correction to years of artificial support.

It also sent a strong signal to investors and international financial institutions that Nigeria was committed to economic reform. To support the new policy direction, the Central Bank of Nigeria (CBN) began clearing forex backlogs, tightening monetary policy, and taking steps to stabilise inflation.

But after some initial volatility in the first half, the naira stabilised even as oil prices fell,  a Bloomberg News report said yesterday.

Analysts from Deutsche Bank AG to Cardinal Stone expect the Nigerian currency to end the year near N1,556 per dollar — its average exchange rate in the first six months of 2025 after it slumped 41 per cent in 2024. It traded around 1,530 on Tuesday, largely flat on a year-to-date basis, the Bloomberg report added.

The change in the naira’s fortunes could also be attributed to its undervaluation, higher non-oil exports and lower import demand, Chief Investment Officer at Emerging Markets Investment Management Ltd. in London,  Ayo Salami said.

The currency is trading below its fair value based on purchasing power parity, he stressed.

A steady naira will offer relief to businesses after its steep losses in the prior two years caused by the central bank’s decision to allow it to trade more freely against the dollar, Bloomberg said.

The naira’s stability has also been helped by a weakening US dollar, which is down more than 10 per cent this year, and less dependency on imported refined products.

Besides, Africa’s richest person, AlikoDangote, commissioned a 650,000 barrels-per-day refinery that turned Nigeria into a net exporter of the refined products. Foreign-exchange reforms and investors’ scramble for investments outside the US have also benefited Nigerian assets, leading to increased dollar inflows.

A Bloomberg index for local bond performance is at a record high and has returned 19 per cent this year, its best first-half performance since December 2020. The gauge for emerging-market local debt has returned 12 per cent in the period. Stocks in the West African nation are up 18 per cent this year.

“The NGN has become more correlated with global risk conditions,” said the head of Africa strategy at Standard Chartered Plc, Samir Gadio stressed.

“Risk conditions have since improved materially; this has supported renewed portfolio flows into Nigeria debt even with oil prices currently below $70 per barrel,” Gadio explained.