Nigeria’s financial markets and currency are showing early positive momentum as the country’s foreign exchange reserves continue to climb, bolstering investor confidence and easing long-standing pressure on the naira.

The Central Bank of Nigeria (CBN) reported a steady increase in reserves, driven by higher oil revenues, improved diaspora remittances, and recent foreign investment inflows.

The naira has strengthened marginally against the U.S. dollar on both official and parallel markets, reflecting reduced speculative demand and improved liquidity. Equities and fixed-income markets have also responded positively, with the NGX All-Share Index posting gains and yields on government securities stabilizing as foreign portfolio investors cautiously return.

Analysts attribute the reserve buildup to favorable crude oil prices, enhanced non-oil export initiatives, and the CBN’s tighter monetary policies aimed at curbing inflation and stabilizing the exchange rate. However, experts caution that sustained improvement will require structural reforms, diversification from oil dependency, and continued fiscal discipline.

While rising reserves provide a buffer against external shocks and support currency stability, challenges remain—including elevated inflation, limited FX liquidity depth, and dependence on volatile energy exports. The CBN faces the delicate task of balancing reserve accumulation with domestic economic needs without stifling growth.

If maintained, this trend could reinforce monetary policy credibility, attract additional foreign investment, and create a more predictable environment for businesses and investors. However, the gains remain fragile, heavily influenced by global oil market dynamics and geopolitical factors beyond Nigeria’s immediate control.

Source: BusinessDay