The naira saw a slight appreciation against the dollar, but analysts warn that external risks, including declining crude oil prices, could affect its stability

At the close of trading on Wednesday, the naira appreciated by 0.16% to 1530.52/$ from 1532.93/$ in the previous trading session, according to data from the Central Bank of Nigeria (CBN).

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Despite this slight appreciation, analysts noted that the naira’s stability remains fragile, with external factors, including declining crude oil prices, posing potential risks.

The naira traded as high as 1545/$ and as low as 1500/$, marking a fluctuation within a narrower range than seen on Tuesday. In the parallel market, however, the exchange rate remained unchanged at 1,585.00/$, which has widened the spread for speculative traders.

The gap between the official and parallel market rates has now narrowed to about 3.07% from 3.40% earlier in the week.

While analysts point out the slight depreciation, they also suggest that the market is stabilising due to structural reforms and increased forex inflows into the country.

Tilewa Adebajo, CEO of CFG Advisory, explained that the exchange system has evolved, with more people using digital platforms to send money to Nigeria, which is contributing to the naira’s relative stability.

“The reason we are seeing some stability is because there is a new system where everyone uses one portal to buy and sell their dollars or whatever currency,” Adebajo said.

She also noted that many foreign inflows are coming through these digital platforms, which provide the official exchange rate, thus reducing reliance on the parallel market.

Comercio Partners, in an investor note, praised the recent stability of the naira, noting that the currency has remained within the N1,450-1,550 range against the dollar, helping to curb rising import costs.

The investment house credited the naira’s relative stability to improved forex inflows, a positive current account position, and the CBN’s efforts.

However, they cautioned that this stability could be threatened by external factors, especially a decline in global crude oil prices. So far, Brent crude prices have fallen by 5.5% year-to-date, driven by expectations of rising global oil supply, policy shifts, and weaker demand. With the U.S.

planning to increase oil production and OPEC+ beginning to unwind voluntary production cuts in April 2025, oil prices could face additional downward pressure.

Experts at CardinalStone also echoed these concerns, highlighting that while the naira’s stability is supported by structural reforms and positive inflows, the outlook remains uncertain due to external risks like oil price volatility.

“Nigeria’s long-term stability hinges entirely on sustained forex inflows, competitive market dynamics, and the Central Bank keeping its eye on the ball,” their report stated. “One policy misstep and we’re right back to square one.”