Dollar Pressure Persists as CBN Reforms Tested

Pressure on the naira persisted this week as the Central Bank of Nigeria’s (CBN) ongoing monetary and foreign exchange reforms continued to face stiff market tests, despite renewed assurances by regulators aimed at restoring confidence in the currency.

At the official foreign exchange window, the naira traded with mild volatility against the US dollar, while rates at the parallel market remained under pressure, reflecting sustained demand for foreign currency by importers, investors and individuals. Analysts say the divergence underscores structural challenges still confronting Nigeria’s forex market, even as reforms gain traction.

The CBN, under its current leadership, has embarked on a series of reforms including the unification of forex windows, tighter monetary policy, and enhanced transparency in FX allocations. While these measures have been welcomed by investors and multilateral institutions, short-term pains have continued to weigh on the currency.

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Market operators attribute the pressure to a combination of factors, including unmet dollar demand, declining oil revenue inflows, and speculative activities. The recent increase in interest rates was intended to attract foreign portfolio inflows and curb inflation, but traders say confidence remains fragile.

In recent weeks, the apex bank has also intensified interventions to clear verified FX backlogs, a move authorities believe will reassure foreign investors and boost inflows. However, economists caution that sustainable stability will depend largely on Nigeria’s ability to grow non-oil exports and improve dollar earnings.

Businesses, particularly manufacturers and importers, have continued to grapple with rising costs as exchange rate instability fuels inflationary pressures. Consumer prices have remained elevated, worsening the cost-of-living crisis for millions of Nigerians.

The federal government has reiterated its commitment to complementary fiscal reforms, including boosting oil production, attracting foreign direct investment and expanding export capacity. Officials say coordination between fiscal and monetary authorities is critical to easing pressure on the naira.

As reforms are tested by market realities, analysts agree that while short-term volatility may persist, consistent policy implementation and improved dollar supply could gradually stabilize the currency.