Nigeria’s Naira Exhibits Marginal Weakening Amidst Resumption of International Card Transactions
The Nigerian Naira experienced a slight depreciation at the official Investors’ and Exporters’ (I&E) window, closing at N1,529.22/$ on Tuesday, compared to N1,528.33/$ on Monday. This marginal weakening coincides with the resumption of international transactions on Naira-denominated cards by several Nigerian banks, including United Bank of Africa, Wema Bank, GTBank, and FirstBank. These banks have reinstated the service with varying limits, ranging from $1,000 per quarter to $500 per month. This move is anticipated to increase the demand for foreign exchange in a market that has recently exhibited relative stability. Meanwhile, the parallel market, often a barometer of forex accessibility, witnessed no change, with the Naira remaining steady at N1,540/$. This dual market dynamic underscores the complexities of Nigeria’s foreign exchange landscape.
CardinalStone’s Analysis: Naira Projected to Remain Range-Bound in the Second Half of 2025
CardinalStone, a leading financial advisory firm, has projected that the Naira will likely remain within a defined range during the second half of 2025, specifically between N1,550.00/$ and N1,635.00/$. This prediction reflects a relatively stable outlook for the currency, despite the anticipated increase in forex demand due to the resumption of international card transactions. Their mid-year review highlighted the various factors that influenced the Naira’s performance during the first half of the year. Global economic uncertainties, fueled by US trade policies and escalating geopolitical tensions, played a significant role in shaping the Naira’s trajectory.
Global Risk-Off Sentiments and CBN Interventions: Navigating External Shocks
During the first half of 2025, the Naira faced considerable pressure due to heightened global risk aversion. Investors, reacting to global uncertainties, shifted their capital towards safer havens like US Treasuries and gold, resulting in significant capital outflows from Nigeria. These outflows, totaling $22.83 billion, put downward pressure on the Naira. The Central Bank of Nigeria (CBN) responded by intervening in the forex market, selling a substantial $4.72 billion to stabilize the currency and mitigate the impact of these external shocks.
Debunking Concerns About CBN Interventions: Maintaining Market Stability and Transparency
CardinalStone has dismissed concerns regarding the CBN’s market interventions, asserting that these actions do not signify a return to a fixed exchange rate regime or an attempt to manipulate the Naira’s value. Instead, the current flexible exchange rate framework allows for discretionary interventions to address market distortions. The firm emphasizes that the distortions witnessed in the first half of 2025 were primarily driven by global factors rather than internal weaknesses within the Nigerian economy. The CBN’s proactive steps to enhance transparency in the forex market have further reinforced this perspective.
Assessing the CBN’s Intervention Strategy: A Measured Approach Compared to Previous Periods
The CBN’s average monthly intervention during this period amounted to $786.58 million, considerably lower than the $2.30 billion pre-COVID and $1.38 billion post-COVID levels. These previous intervention levels were aimed at defending the Naira at arguably unsustainable levels, despite underlying macroeconomic vulnerabilities. CardinalStone’s analysis suggests that the CBN has adopted a more measured and strategic approach to its interventions, focusing on maintaining market stability rather than artificially propping up the currency.
Naira’s Fair Value: A Consensus Emerges Among Local and International Observers
A noteworthy development is the growing consensus among both domestic and international observers that the Naira is currently trading close to its fair value. This signifies a positive shift in perception regarding the currency’s valuation, suggesting that the current exchange rate reflects the underlying economic fundamentals more accurately than in previous periods. This assessment further supports the CBN’s current strategy, emphasizing the importance of a market-driven exchange rate and transparent intervention mechanisms. This convergence of views also lends credence to the expectation of continued relative stability in the Naira’s value in the near term.
