Currency traders have attributed the recent appreciation of the naira and the relative stability in Nigeria’s foreign exchange (forex) market to a combination of excess dollar supply and heightened security enforcement targeting speculators and hoarders.
They also identified other contributing factors, including the effective implementation of Central Bank of Nigeria (CBN) policies, stronger fiscal buffers, growing investor confidence, a favourable balance of payments, higher foreign inflows, and generally positive market sentiment.
The forex market has witnessed significant stability, with the naira appreciating at the parallel market to N1,535/$1 on Tuesday, July 29, 2025, from N1,580/$1 on July 1, 2025.
This improvement reflects renewed investor confidence and continued CBN interventions aimed at stabilizing the currency.
Analysts suggest that the stronger naira is a positive market response to the CBN’s monetary tightening and broader reform agenda.
Access to foreign exchange has long been a major challenge in Nigeria, forcing businesses and travelers to depend on the parallel market and creating opportunities for speculation. This speculative activity had often destabilized the forex system.
In response, the CBN launched a series of reforms designed to attract foreign capital, stabilize prices, and restore confidence in the forex regime.
These coordinated measures are beginning to show tangible results, as reflected in increasing external reserves and improved access to forex via official channels.
With enhanced dollar liquidity, Nigerian banks have also lifted the more than three-year ban on the use of naira-funded debit cards abroad — a significant move that has contributed to the naira’s appreciation against the dollar and other global currencies.
Licensed forex traders in Lagos and Abuja have reported improved dollar supply at the official window, resulting in greater convergence between the Nigerian Foreign Exchange Market (NFEM) and the parallel market rates.
“Supply Outstrips Demand,” Says BDC President
In an exclusive interview with Nairametrics, Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), confirmed that forex supply now exceeds demand.
He credited the naira’s current strength to the CBN’s effective policy reforms, price stability in key commodities, fiscal discipline, and the cessation of “ways and means” deficit financing.
“The forex market is stable; supply outstrips demand. Policy reforms’ effectiveness, fiscal discipline, and stoppage of ways and means, along with commodity price stability, are all culminating factors for the local currency’s new strength and stability,” Gwadebe said.
“The velocity of volatility remained mean and moderate at the current exchange rate.”
He also praised the contributions of agencies such as the Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU), noting their sensitization efforts and workshops focused on capacity building in financial institutions.
“It is a bouquet of hard work from stakeholders, regulators, security agencies, operators, and the fiscal authorities,” Gwadebe added.
Key Drivers of Forex Market Stability
Further elaborating on the market’s improved performance, Gwadebe said:
“I have mentioned them as follows: Supplies outstrip demand, and it’s natural for the naira to appreciate against the greenback. CBN policy implementation, fiscal discipline, higher foreign inflows, investors’ confidence, improved balance of payment position, and reduced speculation and hoarding due to security agencies’ efforts.”
On the source of forex inflows, Gwadebe highlighted increased diaspora remittances, oil proceeds, improved fiscal buffers, foreign loans, positive market sentiment, and political stability — all supported by close coordination among regulators, stakeholders, and security agencies.
He stressed that confidence in the naira is rising among both investors and Nigerians, as illegal speculative activities, hoarding, and currency substitution have decreased significantly.
Speculators Retreat Amid Market Confidence
Abubakar, a BDC operator, echoed these sentiments, noting that the surge in dollar supply has made many reluctant to hold onto the currency for speculative purposes.
“There has been much supply into the market in recent weeks. Many people don’t see the need to hold, keep, or hoard the dollar anymore,” he said.
“People may even be a bit scared to keep the dollar for speculative purposes,” he added.
Another operator, who chose to remain anonymous, said the recent upgrades in Nigeria’s economic outlook by agencies like Fitch and Moody’s may also be contributing to the market shift.
“The recent positive growth projections by agencies like Fitch and Moody’s may be responsible for this. In fact, the black market has been doing even better than the official market in recent weeks,” he said.
[Nairametrics]
