The Nigerian naira continued its upward trajectory, appreciating to ₦1,553.11 per US dollar in the official foreign exchange market as of June 5, 2025. This reflects an improvement of ₦12.35, or 0.79%, compared to the previous day’s rate of ₦1,565.46. The appreciation marks a continuation of a broader trend seen throughout the week, highlighting increased stability and demand for the domestic currency in the official market segment.
Throughout the week, the naira’s value has consistently improved, with exchange rates recorded at ₦1,581.58 on Monday and ₦1,579.27 on Tuesday. This sustained appreciation indicates a strengthening of the naira, reversing prior periods of volatility. The improved rate performance is indicative of more balanced supply and demand dynamics within the official foreign exchange market.
The Central Bank of Nigeria’s (CBN) foreign exchange policies and reforms have played a central role in this positive movement. Notably, the introduction and continued operation of the Electronic Foreign Exchange Matching System (EFEMS) has enhanced market efficiency. EFEMS allows for real-time matching of forex demand and supply between authorized dealers and end-users, reducing delays and improving transparency in the allocation of foreign currency.
By facilitating a transparent and competitive bidding process, EFEMS helps prevent market distortions and limits the ability of intermediaries to influence pricing unfairly. This system is designed to increase liquidity and provide a more accurate reflection of market-driven exchange rates, supporting a healthier forex environment.
In the parallel or black market, the naira has also exhibited a degree of appreciation. On June 4, the dollar traded at ₦1,612, down slightly from ₦1,616 the day before. Although parallel market rates typically differ from official rates due to supply-demand imbalances and regulatory restrictions, this marginal decrease signals some level of alignment between the two markets.
The narrowing spread between official and parallel exchange rates is a significant development, as it suggests progress towards market convergence. Reducing this gap is a key policy objective, as a unified exchange rate regime can help eliminate arbitrage opportunities and improve investor confidence in the naira.
Several factors contribute to the ongoing naira appreciation. One major driver is improved forex inflows, particularly from Nigeria’s oil sector. Increased crude oil prices and production levels have boosted foreign exchange earnings, which, in turn, have raised liquidity in the official market. Additionally, there have been rising inflows from foreign portfolio investors attracted by Nigeria’s improving macroeconomic fundamentals.
The Central Bank’s strategic interventions, including periodic forex sales to authorized dealers and selective currency controls, also underpin the stability. By balancing forex supply with measured demand management, the CBN aims to maintain orderly market conditions while avoiding excessive volatility.
The appreciation of the naira has positive implications for the Nigerian economy. A stronger currency can help reduce inflationary pressures by lowering the cost of imported goods and services. It also improves the external purchasing power of Nigerian businesses and consumers, potentially supporting broader economic growth.
Despite these gains, the Central Bank remains cautious, acknowledging ongoing challenges such as global economic uncertainties and fluctuating commodity prices that could impact foreign exchange dynamics. Policymakers continue to emphasize the need for sustained reforms, improved forex market infrastructure, and diversification of Nigeria’s revenue base to build resilience.
Overall, the combination of enhanced market mechanisms like EFEMS, supportive monetary policy and favorable external conditions has fostered the naira’s steady appreciation against the US dollar. The Central Bank’s commitment to transparency and efficiency in the forex market remains pivotal to sustaining this trend in the medium to long term.
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