Nigeria’s currency opened May on a stronger footing, with the naira appreciating to N1,367 per dollar in the first trading session of the month, reflecting improved foreign exchange (FX) liquidity and cautious optimism among market participants.
The gain marks a notable recovery from the volatility seen in April, when the currency came under pressure amid fluctuating dollar supply and heightened demand from importers and portfolio investors.
Analysts say the early May rebound suggests that recent policy measures aimed at stabilising the FX market may be beginning to take effect. Market participants attribute the naira’s appreciation to a combination of increased dollar inflows and tighter regulatory oversight.
The Central Bank of Nigeria (CBN) has sustained interventions designed to boost liquidity, defined as the ease with which foreign currency can be accessed in the market, while also reinforcing transparency in FX transactions.“ The current movement indicates a more balanced market,” said a Lagos based currency trader. “We are seeing improved supply dynamics, which is easing pressure on the naira, at least in the short term.”
The strengthening also aligns with broader efforts by authorities to restore investor confidence following months of uncertainty. Foreign portfolio investors, who trade equities and bonds, have remained cautious due to concerns about currency stability and repatriation risks.
A more predictable exchange rate environment could encourage renewed inflows, supporting both the naira and Nigeria’s capital markets. However, analysts caution that sustaining the currency’s upward trajectory will depend on structural factors, including export earnings and external reserves. Nigeria’s reliance on oil revenues means that global crude prices remain a key determinant of FX inflows.
Any sustained weakness in oil markets could quickly reverse recent gains.Domestic demand for dollars also remains elevated, driven by import dependent sectors and seasonal corporate obligations. This underlying pressure means that while short-term appreciation is encouraging, the naira’s outlook remains sensitive to shifts in supply-demand dynamics.
Market watchers will closely monitor the CBN’s policy stance and its ability to maintain adequate FX buffers. Continued reforms aimed at unifying exchange rates and improving market transparency are seen as critical to ensuring long-term stability. For now, the naira’s firmer start to May provides a tentative signal that the worst of recent volatility may be easing, even as structural challenges continue to shape the trajectory of Africa’s largest economy.
