Naira rises to N1,388/$ in parallel market

Nigeria's naira continued its recovery momentum yesterday, appreciating to **N1,388 per dollar in the parallel market**, up from N1,395 the previous trading day. This modest but meaningful 0.5% single-day gain reflects persistent Central Bank of Nigeria (CBN) efforts to stabilize the currency through ongoing forex interventions and supply-side measures.

## Why is the naira strengthening now?

The recent appreciation follows months of volatility that saw the parallel market rate spike above N1,500/$ in late 2024. Several factors are converging to support the currency's recovery. First, the CBN has intensified its fx liquidity provision to authorized dealers, releasing dollars into the system at a more consistent pace to narrow the spread between official and parallel rates. Second, Nigeria's crude oil production has recovered toward 1.8 million barrels per day following upstream investments, boosting dollar inflows. Third, diaspora remittances—a critical fx source—remain robust, with Q4 2024 flows exceeding expectations.

The parallel market, which traditionally trades at a 15–25% premium to the official rate (currently around N1,062/$), serves as a barometer for underlying currency pressure. When parallel rates decline, it signals improving fx confidence and reduced speculative demand for dollars.

## What does this mean for investors?

For foreign portfolio investors (FPIs) and multinational corporates with naira exposure, the currency appreciation reduces hedging costs and improves the real returns on naira-denominated assets. Nigerian equities and fixed-income securities become more attractive when currency headwinds ease. The **Nigerian stock exchange** has already priced in some of this optimism, with the all-share index rallying 2.3% this month.

However, importers and manufacturers face a trade-off. A stronger naira reduces the landed cost of foreign inputs, which typically boosts profit margins. But the gains are fragile—any slip in oil prices or unexpected capital outflows could reverse the trend within days.

## Is N1,388 sustainable?

Sustainability depends on three critical variables: oil price stability above $70/barrel, consistent CBN intervention capacity, and absence of external shocks. The naira has tested this level before; in mid-2024 it briefly touched N1,350/$ before slipping back to N1,450 within weeks. The key difference now is the CBN's explicit commitment to a "managed float" with transparent intervention protocols, signaling policy consistency.

The gap between parallel and official rates—roughly N326—remains elevated, indicating residual fx scarcity for non-priority importers. Until that spread narrows sustainably below N150, significant currency volatility will persist.

Market analysts estimate the naira could find resistance at N1,350/$ and support at N1,420/$ in the near term. Any breach below N1,350 would signal a structural shift toward single-digit inflation and stronger external reserves—a bullish scenario for fixed-income investors.

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