Amidst strong appreciation of the local currency, the Naira, in the foreign exchange market, there are indications that the fate of the currency is still hanging in the balance.
Financial Vanguard tracking of developments in the currency market last weekend indicates that the Naira has appreciated by 9.61 percent in the parallel market to N1,505/ $1 up from this year’s high of N1,665/$1, while the official market has recorded 3.1 percent appreciation to N1,500/$1 up from N1,548/$1. It also has a very positive and impactful outcome on businesses.
“What you are seeing is a very good trend and my hope is that this will be sustained. And then my advice is that the fiscal authority should complement the monetary authorities to ensure that we don’t see an unnecessary surge in liquidity which could dislocate the current trajectory of stability in the macroeconomic environment, especially the stability in the exchange rate”.
Naira Appreciation Alone can’t Moderate Price Stability – Adonri
Reacting to the recent appreciation of the Naira, David Adonri, Analysts/ Executive Vice Chairman at Highcap Securities Limited, said: “Recent appreciation of the Naira may not immediately reflect on the price of goods because of the lag between cause and effect in economics.
Other than currency volatility, the economy also has other factors fueling inflation to contend with. If they all simultaneously moderate, price stability can be feasible.
“Judging from the recent revelation by a highly respected economist that FGN has so far pumped in about $8 billion to prop up the Naira, the recent appreciation may be a contrived gimmick. ”Notwithstanding, the Naira has every reason to start appreciating considering the reduction of the pressure on it from the petroleum sector and the pass through effect of declining energy cost.
”The game changer will come if and when FGN is able to liberate the rural economy from the strange hold of bandits and terrorists so as to close the yawning domestic supply gap”.
Impact on Economy Depends on Sustainability Egbomeade
In his own comments, Clifford Egbomeade, Analyst and Communications Expert, said: “The recent appreciation of the Naira is a positive signal, particularly for businesses that rely on imported inputs and consumers facing inflationary pressures.
”The real impact on the broader economy depends on whether this trend is sustained. If the appreciation is driven by strong fundamentals, such as: improved foreign exchange reserves, increased foreign investment, and stronger export performance.
”However, if the rise is merely a result of short-term interventions like CBN liquidity injections or speculative activity, the effects may be temporary, with little long-term impact”.
“Generally, if the Naira maintains stability for at least a quarter, businesses will start experiencing tangible relief, particularly in pricing and operational costs.
”Sustaining this appreciation over the medium to long term depends on structural reforms rather than temporary market adjustments. A stronger naira requires consistent foreign exchange inflows from non-oil exports, improved investor confidence, and a reduction in the economy’s reliance on speculative forex demand. Without these, any gains may be eroded by external shocks or policy reversals.
“Additionally, inflation control is critical if domestic prices continue to rise, any currency gains may not translate into real economic benefits. The government must focus on enhancing local production, reducing import dependence, and ensuring a stable monetary policy environment to make this appreciation more than just a fleeting occurrence”.
Helping businesses plan better — ASBON
On his part, President of the Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said the stable trend in the exchange rate has been helping businesses to plan better.
He said: “The relative strengthening of the Naira has been positively impactful on the economy and businesses. The stability has been one of the factors responsible for the disinflation witnessed recently and the recent rise in GDP.
“It has helped businesses to now plan and project forward. It has also instilled some level of trust in investors, boosting their confidence and investment in the economy.
“SMEs are now able to compete more favourably with the lower cost of input due to the FX stability, leading to more sales and profits.”
