The Nigerian Naira faced a complex trading session on Thursday as the Central Bank of Nigeria (CBN) actively intervened in the foreign exchange market to manage the currency’s volatility.
Following a significant policy shift by the Monetary Policy Committee (MPC) earlier this week, the Naira has shown contrasting movements across the official and parallel market segments.
In the Nigerian Autonomous Foreign Exchange Market (NAFEM), the Naira slipped marginally, closing at ₦1,356.11/$1. This represents a slight depreciation from Tuesday’s closing rate of ₦1,355.37/$1.
Market insiders report that the apex bank has been “
mopping up excess dollars from the official window to prevent the Naira from appreciating too rapidly, a move intended to stabilize the market and maintain export competitiveness.
One of the most notable developments this week is the sharp narrowing of the arbitrage gap between official and street rates.
Following the CBN’s decision to cut the Monetary Policy Rate (MPR) by 50 basis points to 26.5%, the parallel market responded positively. The Naira regained strength on the streets, appreciating to ₦1,390/$1 on Wednesday and holding steady into Thursday.
The premium between the two markets has now compressed significantly, dropping from over ₦45 earlier in the week to approximately ₦34. This alignment is a positive signal for investors, as it reduces the incentive for round-tripping and suggests a move toward a more unified exchange rate system.
The recent interest rate cut by Governor Olayemi Cardoso’s team follows a period of cooling inflation and improved foreign exchange buffers. However, liquidity remains a focal point for traders. While the CBN’s intervention has dampened a potential runaway rally of the Naira, the move also ensures that the market does not suffer from sudden, destabilizing spikes in value.
Financial analysts suggest that as the bank continues to balance interest rates with currency stability, the Naira may find a new normal in the coming weeks.
For now, the focus remains on whether the current FX inflows can sustain this newfound stability without constant heavy intervention from the central bank.