The naira has appreciated against the British pound sterling, euro, and Canadian dollar since the introduction of the Electronic Foreign Exchange Matching System (EFEMS) by the Central Bank of Nigeria (CBN).
On November 26, 2024, the CBN directed all banks operating in the interbank foreign exchange market to adopt the Bloomberg BMatch System for trading. The platform, which went live on December 2, 2024, was introduced to enhance transparency and improve operational efficiency in Nigeria’s FX market.
As a result, the naira strengthened against the British pound sterling by 209.01/ £, reflecting an 11.02 percent gain. According to the CBN data, the pound was quoted at N1,896.62 as of February 21, 2025, compared to N2,105.63 recorded on December 2, 2024, when EFEMS began operations.
At the parallel market, popularly known as the black market, the naira appreciated to 1,920/ £ against the pound as of February 2, 2025 compared to an average rate of 2,238/£in December 2024.
The naira also strengthened against the euro in the official market, gaining 176.67/ € or 11.3 percent to close at 1,569.16/ € on February 21, 2025 from 1,745.83/ € seen on December 2, 2024, the day the EFEMS commenced trading.
In the black market, euro to the naira exchange rate closed at N1,525 on Monday, stronger than N1,600 seen on the previous day, data from an online data collating platform indicated.
On Monday, the naira black market exchange rate for 1 Canadian dollar (CAD) was N1,100.
“This means that you can get N1,100 for every 1 Canadian dollar that you exchange. The black market exchange rate is typically higher than the official exchange rate because it is not regulated by the government,” said an online data collation platform.
The naira has gained 157.50 to the dollar since the commencement of the EFEMS, marking 10.48 percent rise compared to 1,660/$ quoted on December 2, 2024, the first EFEMS trading day, data from the CBN showed.
Naira stability, investor confidence
The Monetary Policy Committee (MPC) said the stability in the foreign exchange market with the resultant appreciation of the exchange rate and the gradual moderation in the price of Premium Motor Spirit (PMS) are expected to positively impact price dynamics in the near to medium term.
According to Olayemi Cardoso, governor of the CBN, the MPC highlighted the benefits of the improvements in the external sector to exchange rate stability, including the convergence of rates between the Nigeria Foreign Exchange Market (NFEM) and the Bureau de Change (BDC), and urged the bank not to relent in its effort to boost market liquidity.
The committee acknowledged recent measures introduced by the CBN, such as the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code, to foster transparency, ethics and credibility in the market. The MPC is, thus, of the view that following major policy measures undertaken by the monetary and fiscal authorities, the flow of foreign direct and portfolio investments as well as diaspora remittances are expected to increase as investor and stakeholder confidence improves.
On November 2024, the apex bank issued comprehensive guidelines for the operations of the interbank foreign exchange (FX) trading system via the Electronic Foreign Exchange Matching System (EFEMS), pegging the minimum tradable amount at $100,000 with incremental clip sizes of $50,000.00 – to promote transparency and efficiency in the FX market.
Omolara Duke, the CBN’s director of the Financial Markets Department, announced this in a circular sent to all banks recently. According to Duke, the EFEMS initiative is designed to ensure “transparent, fair, and efficient FX trading, minimise counterparty risks, and enforce compliance with CBN regulations.”
Declining reserves
The latest report from Afrinvest Securities Exchange Limited indicates that the Central Bank of CBN foreign reserves declined by 0.8 percent week-on-week (approximately $320.6 million), closing at $38.8 billion as of February 20, 2025. The reduction is attributed to the CBN’s ongoing intervention in the foreign exchange market as it supplies U.S. dollars to commercial banks and Bureau De Change (BDCs) to support the naira.
As a result of these interventions, the naira strengthened across both the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market, appreciating by 1.0 percent and 4.0 percent week-on-week respectively to N1,494.00 and N1,495.00 per U.S. dollar.
The faster appreciation in the parallel market significantly narrowed the exchange rate gap between both markets to just N0.97, down from N45.30 in the previous week.
Naira to maintain positive trajectory
Looking ahead, the analysts at Afrinvest said the naira is expected to maintain its positive trend across foreign exchange segments, provided the CBN sustains its dollar supply to BDCs and Deposit Money Banks (DMBs), barring any unforeseen market shocks.
Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said the CBN is making strides in stabilising the foreign exchange market, noting that challenges posed by the unregulated black market remain significant.
He stressed the complexities of addressing the persistent volatility in the FX market.
“The measures taken by the CBN are yielding some positive results, but it is a work in progress,” Yusuf said. “Speculators and manipulators in the market are constantly devising new tricks, so this must be a continuous effort.”
Rewane urges patience
However, Bismarck Rewane, managing director and chief executive officer of Financial Derivatives Company (FDC), warned policymakers not to throw caution to the wind as a result of the recent stability of the naira.
The economist said on Channels TV last Friday that the quick appreciation of the naira is ‘temporary’ and should be treated with caution, advising Nigerian policymakers not to be ‘carried away.’
“We’re seeing that the naira is strengthening but with caution. Let’s not be too hasty because it’s going to correct itself,” Rewane said.
“There are many things that are happening: Reserves of over $40 billion are coming down. We have also borrowed $4 billion in bond issues.
“When you look at all of that, we have almost spent $8 billion to support the naira at the current levels,” he further said. (BusinessDay)
