The Central Bank of Nigeria (CBN) has reaffirmed its unwavering commitment to maintaining stability in the foreign exchange (FX) market, a crucial element in the country’s fight against inflation and its pursuit of economic recovery. Governor Olayemi Cardoso emphasized the bank’s determination to identify and eliminate “bad actors” whose activities undermine the naira, Nigeria’s currency. This declaration comes amidst ongoing efforts to reform the FX market and align it more closely with market fundamentals, a process that has seen the introduction of new initiatives and a tightening of monetary policy. While acknowledging the progress made, Cardoso stressed the FX market remains a key pressure point requiring constant vigilance and regulatory oversight.
Recent market data indicates a slight depreciation of the naira at the official FX market, closing at N1,532.39/$ on Tuesday, compared to N1,531.19/$ on Monday. This marginal decline of 0.08% suggests continued volatility within a narrow band, as the market adjusts to the recent reforms and shifting demand-supply dynamics. Conversely, the exchange rate at the Bureau De Change (BDC) segment remained stable at N1,570/$, indicating relatively consistent demand for physical dollars in the informal market. This stability, despite the CBN’s intensified surveillance and interventions, suggests the reforms are starting to influence market behavior.
Cardoso’s remarks at the February 2025 Monetary Policy Committee (MPC) meeting underscore the CBN’s focus on safeguarding the FX market from practices that threaten price stability and investor confidence. He highlighted the importance of maintaining a high level of surveillance to identify and address any manipulative activities that could destabilize the market or the exchange rate. The CBN’s commitment to this objective is central to its broader strategy of fostering a stable and transparent FX market, essential for attracting foreign investment and promoting sustainable economic growth.
The CBN’s recent reforms, including the launch of the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code, are designed to enhance transparency, promote ethical conduct, and improve operational efficiency within the FX market. According to Cardoso, these initiatives are already yielding positive results, with a relative appreciation of the naira and improved liquidity in the FX market. He attributes these improvements to renewed foreign investor confidence, supported by sustained remittance inflows, export proceeds, and foreign direct investment. Importantly, demand is shifting towards the official FX window, indicating a reduction in speculative pressures, a positive sign for market stability.
The MPC, which maintained the Monetary Policy Rate at 27.50%, assessed the impact of the ongoing policies on inflation and financial stability. The committee noted that the FX reforms and tighter monetary conditions are contributing to a gradual easing of inflationary pressures, particularly following the rebasing of the Consumer Price Index by the National Bureau of Statistics. While these developments are encouraging, the CBN Governor emphasized the ongoing need for vigilance and strict regulatory oversight in the FX market to prevent malpractice. He underscored that a stable FX market is not just a monetary goal, but a critical prerequisite for broader economic recovery and resilience, especially given the continuing adjustments to the removal of fuel subsidies and fiscal reforms.
The February MPC communique also highlighted broader macroeconomic progress, including a positive current account balance, rising oil production levels, and robust external reserves. These factors strengthen the CBN’s ability to manage liquidity and defend the naira. While acknowledging persistent challenges, Cardoso emphasized the importance of aligning fiscal and monetary policy, along with institutional reforms and targeted surveillance, to build a more credible and resilient financial system. The CBN remains committed to navigating the complexities of the FX market and ensuring its stability as a cornerstone of Nigeria’s economic recovery and future growth.
