Naira Finds Footing as Reforms Pay Off. Nigeria’s economy has reached a significant milestone, with the Naira’s real effective exchange rate now considered the most competitive it has been in two decades.
This positive shift signals that the country’s recent, often painful, foreign exchange reforms are starting to yield substantial benefits, leading to improved market stability and a closing gap between the official and black-market rates.
The improved economic outlook was highlighted by Yemi Kale, Group Chief Economist and Managing Director of Afreximbank, who praised the reform agenda during a recent keynote address in Lagos.
Exchange Rate Convergence and Market Confidence
A key indicator of the reforms’ success is the convergence of the exchange rate. As of the first week of October 2025, the Naira effectively closed the long-standing gap between the two major foreign exchange windows:
- Official Nigerian Foreign Exchange Market (NFEM): The dollar was quoted at ₦1,455.23.
- Parallel (Black) Market: The Naira strengthened to close at ₦1,455.
This near-perfect alignment in pricing, achieved on Thursday, October 2, 2025, reflects reduced speculative activity and growing market confidence. The stability is further supported by rising external reserves, which had climbed from approximately $32.9 billion at the end of 2023 to over $42 billion by mid-2025—a three-year high. This accumulation of reserves has largely cleared verified foreign exchange backlogs.
The Impact of Flexible Exchange Rate
The adoption of a more flexible, market-reflective exchange rate regime has been “transformative” for the country’s economic foundations.
- For Exporters: The overvalued currency penalty has been removed, making Nigerian products more affordable internationally and stimulating non-oil exports.
- For Businesses: Companies are no longer forced to chase scarce subsidized official foreign exchange, allowing them to focus on core productivity and competitiveness.
- Macroeconomic Stability: The flexible rate acts as a shock absorber against fluctuations in global oil prices, which historically triggered balance-of-payments crises.
However, the reforms have not been without short-term pain. The initial floating of the Naira, coupled with the removal of fuel subsidies, caused a surge in inflation as imported goods became more expensive. Economists note that while currency market stabilization is crucial for long-term health, policymakers must strengthen social protection systems to cushion vulnerable households from these initial price shocks, drawing a lesson from the experience of other nations that underwent similar currency floats.
Ultimately, the sustained stability and rising reserves are seen as critical steps, opening doors to a more diversified and export-oriented Nigerian economy. FOR MORE INFORMATION, I RECOMMEND SONGBUX.