Naira nears key N1,350/$ mark as FX market confidence improves

The Nigerian naira became stronger against the US dollar in the official foreign exchange market on Wednesday.

The naira gained almost N10, closing at N1,357 per dollar, compared to N1,375.5/$ at the beginning of May. This means the naira improved by about 1.2% within one week.

Experts say the improvement was caused by:

Higher demand for the naira by local and foreign investors

Continued support and interventions by the Central Bank of Nigeria (CBN)

Increased trading activity in the foreign exchange market

The report noted that many traders are now reacting to daily economic policies instead of simply expecting the naira to crash.

However, analysts expect the naira to weaken slightly later in 2026 because of increased spending ahead of the 2027 elections. More money entering the economy could put pressure on the local currency.

The CBN’s high interest rate policy is also attracting investors to naira assets such as Treasury Bills, helping to support the currency.

At the same time, over N10.53 trillion is expected to enter the financial system in May through maturing Treasury Bills and Open Market Operations (OMO). This could create excess liquidity and increase pressure on the naira if not properly managed.

Globally, the US dollar has weakened against major currencies due to slower US economic growth and expectations that the US Federal Reserve may reduce interest rate hikes.

The US Dollar Index (DXY), which measures the strength of the dollar against major global currencies, is trading around 98 points after recent declines.

Investors are now waiting for new US jobs data and comments from the Federal Reserve to see the future direction of the dollar.

There are also reports that easing tensions between the US and Iran helped reduce oil prices and lowered fears of inflation, weakening demand for the dollar as a safe-haven currency.