The recent surge in the value of the Nigerian naira Strengthens has sparked positive responses from economic stakeholders and calls for policy consistency to consolidate this progress. On December 6, 2024, the naira closed at N1,535 to the United States dollar, reflecting an impressive 8.24 percent appreciation from the N1,672.69/$ rate recorded just a week earlier on November 29, 2024. This gain of N137.69/$ was driven by the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform, which introduced a more structured and transparent approach to currency trading.
Naira Strengthens
The significant improvement in the naira’s value came at a time when the foreign exchange market in Nigeria has faced persistent challenges, including volatility and limited liquidity. The new FX platform, implemented by the CBN, appears to have addressed some of these issues by boosting market confidence and ensuring a more orderly process for currency transactions. This development has spurred increased liquidity and stability, contributing to the naira’s strength against major currencies like the U.S. dollar.
As the naira continues to gain ground, members of the Organised Private Sector (OPS) in Nigeria have raised concerns about maintaining and building on this momentum. They emphasized that sustaining this positive trend could bolster economic growth, stabilize prices, and attract more foreign investments. The OPS, which represents various business groups and enterprises, argued that a strong currency would help reduce the cost of importing raw materials and finished goods, ultimately driving down production costs and enhancing the competitiveness of Nigerian businesses. This would be crucial for fostering local industries and reducing the nation’s dependency on imported goods.
Naira Strengthens to N1,535/$, Urging Consistency
However, the OPS also called for caution and strategic planning to prevent potential setbacks. They pointed out that while the appreciation of the naira is a welcome development, its sustainability will require consistent regulatory and economic policies. The stakeholders urged the CBN to ensure that the new FX platform remains robust and effective, free from disruptions that could lead to market uncertainty. Additionally, they called for enhanced efforts to diversify the Nigerian economy, so that the country is less susceptible to external shocks, such as fluctuations in oil prices, which have historically influenced the naira’s value.
Beyond the immediate implications for businesses, a sustained strengthening of the naira could have positive repercussions for the general economy. Lower import costs could lead to reduced inflationary pressures, giving consumers greater purchasing power and potentially improving their quality of life. This, in turn, could spark greater domestic consumption and economic activity.
However, experts have cautioned that while the gains are significant, they must be seen as part of a broader, long-term strategy. The OPS underscored the importance of supportive policies that promote industrial growth and bolster the value-added sector of the economy. Without these measures, any appreciation might prove temporary, vulnerable to economic or external factors that could disrupt the market.
In conclusion, the recent appreciation of the naira by over 8 percent against the U.S. dollar is a promising development, attributed largely to the new FX platform by the CBN. While this progress is being celebrated, OPS members have urged the CBN and the government to adopt policies that can sustain this positive trend, thereby boosting economic growth, reducing inflation, and encouraging investment. Ensuring that this currency stability is maintained will require strategic oversight, consistent policy application, and long-term economic planning to safeguard and build on the gains made so far.
