Naira Appreciates as CBN Reforms Show Positive Impact

The Naira gained value against the Dollar, trading at N1,492.49 due to CBN reforms aimed at increasing transparency in the FX market. Analyst Professor Aremu cautioned against premature celebrations, urging focus on boosting production to maintain stability. Cordros Securities noted reduced demand pressure and a decline in FX reserves, projecting continued liquidity support in the market.

On Friday, the Naira appreciated in the official market, exchanging at N1,492.49 per Dollar. Data from the Central Bank of Nigeria (CBN) indicated a gain of N6.57, reflecting a 0.44 percent increase from the previous day’s closing rate of N1,499.07. The Naira’s relative stability is attributed to CBN reforms promoting transparency in the Foreign Exchange (FX) market.

While analysts commend the CBN for the Naira’s steady progress since December 2024, Professor Jonathan Aremu, a retired CBN Director and academic expert, cautions against premature celebrations. He emphasizes the need for enhanced production to sustain these gains. He regards the currency’s appreciation against the Dollar as a positive development but warns that fluctuations could occur.

Professor Aremu highlighted the importance of focusing on production in order to maintain the Naira’s stability. He stated that monetary policy alone, which targets money supply without increasing economic transactions, may not yield the intended appreciation. An increase in goods and services is necessary to support the economy and reduce the value of foreign currencies.

Aremu posited that the depreciation of foreign exchange stems partly from economic conditions that limit purchasing power. He urged the CBN to support the availability of quality goods and services in addition to its monetary interventions. In this framework, reducing money supply should go hand in hand with fostering productive capacities within the economy.

In a related report, Cordros Securities attributed the Naira’s rise to decreased demand pressure, despite ongoing declines in foreign exchange reserves. They noted a drop of $241.50 million in FX reserves, totaling $38.46 billion as of February 27, marking a continued decline. The report anticipates sustained FX liquidity as market efficiency and improved confidence bolster inflows from autonomous sources.

In conclusion, the Naira has shown signs of appreciation in recent trading, aided by reforms from the CBN to promote transparency in the FX market. However, experts, including Professor Aremu, emphasize that sustainable progress will depend on boosting local production and economic activity. The CBN’s commitment to maintaining stability and supporting production will be crucial factors in the Naira’s performance going forward.

Original Source: nannews.ng