The naira witnessed a week of outstanding performance against the dollar at the official foreign exchange (FX) window, reflecting the lucklustre performance against other currencies.

Trading began the week on a positive note as the naira appreciated by 1.4 per cent on Monday to close at N1,498.50 per dollar, showing improved dollar supply.

The positive momentum continued on Tuesday, with the naira strengthening further by one percent to settle at N1,484 per dollar, its strongest level for the week.

However, the midweek witnessed a reversal in fortunes as the naira depreciated by one per cent on Wednesday returning to N1,498.50 per dollar, the same level recorded on Monday, an indication of a renewed demand pressures on the dollar or a temporary dip in forex supply.

Yesterday, the currency recovered marginally, appreciating by 0.3 percent to close at N1,494 per dollar.

This marginal rebound is an indication of a week marked by alternating gains and losses, underlining the current volatility within a relatively narrow band.

Overall, the naira appreciated by 0.3 per cent over the course of the week, gaining N4.50 from Monday’s rate.

According to analysts, despite the fluctuations, the currency remained between N1,484 and N1,498.50, indicating that the CBN may still be playing an active role in managing the exchange rate within a controlled float regime.

The movements come at a time when Nigeria continues to grapple with inflationary pressures, external reserve constraints and fluctuating oil earnings, all of which contribute to the delicate balance of FX supply and demand.

Analysts suggest that while the short-term appreciation is encouraging, the absence of a clear directional trend points to underlying instability that may require sustained policy clarity and structural reforms to resolve.

Reacting on the development, Executive Director of Halo Capital Management Limited, Dr Paul Uzum, linked the performance to both global trends and local fundamentals.

He explained that part of the recovery is being driven by wider movements in international markets, where the dollar has started to show weakness against other major currencies and commodities.

“The dollar is actually falling against other major currencies, the GBP, the Euro and even against metals like gold. From the Nigerian perspective, the economic fundamentals for Nigeria have been improving.”

He noted that Nigeria’s external reserves have risen to over $ 41 billion, providing stronger backing for the currency.

Inflation, which had been a source of deep concern for much of the past two years, has also been on a steady decline. Perhaps most notably, the country recorded a trade surplus in 2025, the first in nearly a decade reflecting a shift toward greater export competitiveness and reduced import dependency.

These developments, he said, reflect a structural improvement in the country’s macroeconomic landscape.

“We have a stronger and rising level of external reserves, which is now over $ 41 billion. Inflation has been consistently falling. We recorded a trade surplus in 2025 for the first time in almost a decade.

“So, the economic fundamentals are improving, and we expect interest rates to fall as well. It is natural that the naira will stabilize and even strengthen.”

Uzum further argued that the looming 2026 general elections are playing a critical role in shaping the policy direction.

With less than 18 months remaining before Nigerians head to the polls, the federal government is under pressure to ensure that key economic indicators such as inflation, employment, and exchange rate stability are trending in the right direction.

He believed this political urgency is likely to drive more assertive policy actions in the coming months.

“From the perspective of political economy, the federal government has a tough election to face in 18 months. They know they have to put the economic fundamentals on track reduce inflation, stabilize the naira, reduce interest rates, create new jobs before that election. Otherwise, the consequences on their party will be terrible.”

In addition to the macro and political dimensions, Uzum highlighted a shift in investor behavior that has helped strengthen the local currency.

According to him, with treasury yields and returns on commercial papers climbing, investors who had previously held dollars as a hedge have begun converting back into naira to capitalize on the domestic opportunities. This trend, he said, is contributing to increased dollar supply in the market.

“From the perspective of investors, some of those holding the dollar have been offloading because of the opportunity cost of doing so in terms of lost opportunities in the capital market and high yields on Treasury bills and commercial papers,” Uzum explained. “This increased supply of the greenback accounts for the improvement in the value of the naira.”

Research Analysts at Cowry Asset Management Limited, Charles Abuedu said the naira’s recent upward trend reflects a mix of improving market fundamentals and timely interventions by the Central Bank of Nigeria (CBN).

He noted that the local currency has been appreciating steadily in recent weeks, supported by stronger foreign exchange inflows and the CBN’s deliberate efforts to stabilize the market.

Abuedu pointed out that the naira’s break below the N1,500 per dollar level, its first in more than eight months is particularly significant, as it marks a psychological shift in market sentiment and signals growing optimism about the prospects for exchange rate stability.

He highlighted last week’s injection of around $29 million by the CBN as a key move to enhance liquidity and maintain the positive momentum.

This intervention, he said, has been reinforced by a softening in the US dollar globally and a gradual uptick in Nigeria’s external reserves, factors that together have helped to strengthen the naira’s position.

Abuedu believed that the recent appreciation could have broader economic benefits, particularly in reducing imported inflation on essential goods and improving investor confidence in the FX market.

However, he cautioned that maintaining this progress will require consistent policy direction and a steady flow of capital into the economy to sustain long-term currency stability.