Naira's Resurgence: Central Bank's Strategic Moves Propel Economic Growth

February 3, 2025

In a series of decisive actions, the Central Bank of Nigeria (CBN) has implemented measures aimed at stabilizing the naira and fostering economic growth. These initiatives are yielding positive outcomes, reflecting the nation's commitment to financial stability and development.

Forex Market Intervention

Between September 6 and 30, 2024, the CBN injected $543.5 million into the foreign exchange market through authorized dealer banks. This intervention, conducted via a two-way quote mechanism in the Nigeria Foreign Exchange Market (NFEM), was designed to mitigate volatility arising from seasonal demand and commodity imports. Omolara Duke, Director of the Financial Markets Department at the CBN, emphasized that these sales were essential to address naira pressure and ensure forex liquidity. Following this move, the naira showed signs of recovery, closing at N1,541 per dollar in the official NAFEM window in September, compared to previous months. 

Economic Growth Projections

CBN Governor Olayemi Cardoso announced an anticipated GDP growth of 4.17% for 2025, driven by ongoing reforms and stabilizing inflation. Reforms initiated in 2023, including the removal of the petrol subsidy and naira devaluation, initially spiked inflation to 34.8%. However, the CBN expects inflation to decline as these reforms take effect. Additionally, foreign exchange reserves are projected to rise, supported by increased oil production, which is forecasted to reach 2.3 million barrels per day by mid-year. 

Enhancing Foreign Exchange Liquidity

In a strategic move to bolster the economy and stabilize the naira, the CBN injected $876 million into the forex market. This intervention aims to enhance market liquidity, promote transparency, and ensure that legitimate foreign exchange demands are met. The CBN's ongoing efforts reflect a commitment to maintaining a stable forex market amid increasing economic pressures both domestically and globally. 

Future Outlook

The CBN remains dedicated to fostering a transparent, market-driven foreign exchange environment. Plans are underway to introduce an Electronic Foreign Exchange Matching System by December 1, 2024, aiming to transform forex transactions in the interbank market by enhancing transparency and promoting a market-driven exchange rate accessible to the public. 

These strategic interventions underscore the CBN's commitment to economic stability and growth, positioning Nigeria for a more robust financial future.


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