Follow Us on Google
By Chinwendu Obienyi
Despite a relatively stable foreign exchange market and a significant increase in the country’s external reserves, the naira narrowly missed out on the list of Africa’s 10 best-performing currencies in the month of May.
Data compiled from African central banks showed that the naira ranked 12th on the continent after appreciating by 0.15 per cent against the U.S dollar during the month. The local currency strengthened to N1,372/$ at the end of May from N1,374/$ at the beginning of the month.
While the gain was modest compared to the continent’s top performers, experts say the naira’s stability reflects improving market conditions and reduced volatility in Nigeria’s foreign exchange market. The Zambian kwacha emerged as Africa’s best-performing currency in May, followed by the Egyptian pound and the Namibian dollar. Other currencies that made the top 10 list were South Africa’s rand, the Seychellois rupee, Eswatini’s lilangeni, Lesotho’s loti, Botswana’s pula, the Congolese franc, and Morocco’s dirham.
Nigeria’s ranking comes at a time when the Central Bank of Nigeria (CBN) continues efforts to deepen liquidity in the foreign exchange market and sustain confidence among investors. One of the major factors supporting the naira during the review period was the growth in the country’s external reserves.
Other News
The country’s gross external reserves rose from $48.36 billion at the beginning of May to $49.34 billion as of May 26, representing an increase of nearly $1 billion within the month. The rise strengthened the country’s ability to meet external obligations and provided additional support for exchange-rate stability.
With the reserve accumulation, combined with ongoing reforms in the foreign exchange market, this has helped reduce speculative pressure on the naira compared to previous years when sharp fluctuations were common.
The relative stability of the currency also comes amid renewed foreign investor interest in Nigeria’s fixed-income market, attracted by higher yields and improving transparency in the FX market. Increased dollar inflows and stronger reserve buffers have contributed to a more balanced supply-demand position in the foreign exchange market. However, despite these positive developments, the naira’s performance remained behind several African peers that benefited from stronger commodity exports, improved capital inflows, or favourable domestic economic conditions.
Experts say maintaining exchange-rate stability and boosting foreign exchange earnings will be crucial if Nigeria hopes to climb higher in future continental currency rankings. Sustained reserve growth, stronger non-oil exports, and continued investor confidence are expected to play key roles in determining the naira’s performance in the months ahead.
Although it fell short of the top 10, the naira’s performance in May highlights a notable shift from the volatility that characterised the market in recent years, suggesting that recent policy measures are beginning to yield results.
