The Nigerian naira has continued to strengthen against major international currencies, with the euro-to-naira exchange rate remaining relatively stable around N1,548 to €1, amid improved foreign exchange liquidity and rising external reserves.
The naira’s recent appreciation has narrowed the gap between official and parallel-market exchange rates, reducing opportunities for arbitrage and encouraging more transactions through formal foreign exchange channels, including the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The euro was reportedly trading around N1,548/€ in the official market, while the parallel-market rate stood at approximately N1,560/€, indicating a significantly reduced premium compared with periods of wider divergence.
Market analysts said the narrowing spread has helped ease speculative pressures on the naira and reduced incentives for foreign exchange hoarding.
External reserves strengthen naira outlook
Nigeria’s gross external reserves have also climbed above $54 billion, fluctuating between $54.08 billion and $54.13 billion, representing their highest level since December 2008.
The accumulation has strengthened the Central Bank of Nigeria’s capacity to intervene in the foreign exchange market and provide liquidity to meet legitimate corporate and retail demand.
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The stronger reserve position effectively gives the CBN greater room to manage volatility in the naira’s exchange rate and support orderly conditions in the foreign exchange market.
Improved reserves have also boosted market confidence, while the availability of foreign exchange has helped reduce speculative demand and pressure on the domestic currency.
Euro remains steady against dollar
Meanwhile, the euro has remained relatively stable against the US dollar, trading around $1.16/€ during Thursday’s European session.
The EUR/USD pair has remained within a narrow range of roughly $1.1566 to $1.1641 for the third consecutive week as investors await fresh US inflation data for clues about the Federal Reserve’s next monetary policy decision.
The US August Consumer Price Index (CPI) is expected to provide important direction for the dollar and global currency markets, particularly through its impact on expectations surrounding US interest rates.
A stronger-than-expected core inflation reading could reinforce expectations of a more hawkish Federal Reserve, potentially supporting the dollar and US Treasury yields.
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Conversely, softer inflation data could strengthen expectations of monetary easing and weaken demand for the dollar, potentially supporting the euro and other major currencies.
Oil prices add to inflation concerns
Global inflation concerns have also been heightened by the renewed surge in crude oil prices, with oil climbing above $100 per barrel amid escalating tensions in the Middle East.
The geopolitical developments have increased concerns about potential disruptions to global energy supplies, particularly around key shipping and energy routes.
For Nigeria, however, higher crude prices could provide additional support for government oil revenues and external reserves if sustained, potentially strengthening the country’s foreign exchange position.
At the same time, prolonged increases in global oil prices could intensify inflationary pressures internationally and complicate monetary policy decisions by major central banks.
Dollar remains firm ahead of CPI
The US Dollar Index was trading around 99.1, with investors closely monitoring the CPI figures for confirmation of the direction of US monetary policy.
The euro’s substantial weighting in the Dollar Index means movements in the EUR/USD pair could significantly influence the dollar’s broader trajectory.
Meanwhile, the euro continues to face challenges despite expectations that the European Central Bank could deliver another rate increase before the end of the year.
ECB President Christine Lagarde has warned that inflationary pressures could remain elevated, keeping monetary policy expectations finely balanced.
For Nigeria, continued naira appreciation, stronger external reserves and reduced official-parallel market differentials could provide a more stable foundation for the currency in the near term, although global dollar movements, oil prices, US monetary policy and geopolitical risks remain key factors that could influence the exchange rate.