The Naira increased in value against the Dollar, trading at N1,492.49, a rise attributed to reforms by the Central Bank of Nigeria (CBN). Experts, including Prof. Jonathan Aremu, emphasize that despite the positive trend, caution is necessary due to potential instability, advocating for increased production to solidify these gains. Additionally, lower demand pressure has contributed to the Naira’s appreciation, yet foreign exchange reserves continue to decline.
The Naira appreciated against the Dollar in the official market on Friday, being traded at N1,492.49. According to data from the Central Bank of Nigeria (CBN), this represents an increase of N6.57 or 0.44 percent from Thursday’s close of N1,499.07. The local currency had a previous trading close of N1,499.11 on Wednesday, showcasing a trend of relative stability attributed to recent CBN reforms aimed at enhancing transparency in the Foreign Exchange (FX) market.
Experts have commended the CBN for the Naira’s steady improvement observed since December 2024. However, Prof. Jonathan Aremu, a retired CBN Director and expert in international economic relations, cautioned against premature celebrations of this trend. He emphasized the importance of increasing production to sustain the Naira’s recent gains and noted instances of prior depreciation which underscore the fragility of this positive moment in the currency’s performance.
In comments to the News Agency of Nigeria (NAN), Prof. Aremu highlighted, “But it may not be time to celebrate yet because, within this period, we have also seen moments when the Naira depreciated.” He emphasized the need for the CBN to foster productive economic activities to promote sustained currency stability, indicating that it must adopt a wider focus beyond mere interest rate adjustments to consider broader factors influencing production and liquidity in the economy.
He brought attention to the quantity theory of money, stating that money supply and population value must align with price and transaction volume. If monetary policy solely targets money supply without fostering increased transactions, the anticipated appreciation of the Naira would fail to materialize. According to him, the economy must generate a higher volume of goods and services, as pricing is influenced by supply and demand dynamics.
Aremu argued, “Focusing only on monetary policy is insufficient. More emphasis should be placed on increasing production,” stressing that improving production levels would contribute to diminishing foreign currency values, thereby reinforcing the Naira. He pointed out that the depreciation of foreign exchange is partly due to economic conditions limiting citizens’ purchasing abilities.
Additionally, Cordros Securities, in its latest economic update, attributed the Naira’s appreciation to decreased demand pressure amidst declining foreign exchange reserves. The report revealed that FX reserves had fallen by $241.50 million week-on-week, totaling $38.46 billion as of Feb. 27, representing seven consecutive weeks of decline. It anticipates that FX liquidity will remain robust, bolstered by an efficient market that boosts confidence and supports inflows from autonomous sources.
The report concluded by predicting that the CBN will likely intervene in times of high market volatility to maintain stability of the Naira in the short term. This reflects a proactive approach from the CBN to manage the exchange rates despite ongoing challenges.
In conclusion, the recent improvement in the value of the Naira against the Dollar highlights the positive effects of CBN reforms aimed at enhancing FX market transparency. However, caution is warranted as substantial challenges remain, particularly concerning production levels and economic conditions. Continuous efforts to boost production and support economic activities are paramount for sustaining the Naira’s gains and ensuring stability in the currency’s future performance.
Original Source: nannews.ng
