Naira Appreciates Amid CBN Reforms But Experts Urge Caution

The Naira appreciated to N1,492.49 against the Dollar due to CBN reforms enhancing FX market transparency. Experts praise this progress, while also cautioning that sustained gains depend on increased production in the economy. The CBN should focus on factors influencing transactions to maintain the Naira’s stability amidst ongoing currency fluctuations.

On Friday, the Naira demonstrated an appreciation against the Dollar in the official market, trading at N1,492.49. According to data from the Central Bank of Nigeria (CBN), this marks a gain of N6.57, a 0.44 percent increase from the previous closing rate of N1,499.07 on February 27. The Naira’s relative stability is attributed to recent CBN reforms that aim to enhance transparency in the Foreign Exchange (FX) market.

Analysts have commended the CBN for the gradual improvement of the Naira since December 2024. However, Professor Jonathan Aremu, a retired CBN Director and expert in International Economic Relations, cautions against premature celebration. He emphasizes the need for increased production capacity within the economy to support and sustain the Naira’s gains, as the currency has experienced fluctuations during this period.

Professor Aremu highlighted the importance of focusing on various economic factors beyond monetary policy alone, citing the quantity theory of money. He explained that simply targeting money supply without enhancing transactions would hinder expected improvements in the Naira’s valuation. He advocates for increasing the volume of goods and services to further bolster the Naira, noting that the depreciation of foreign currencies is partly due to affordability challenges faced by consumers.

In summary, while the appreciation of the Naira reflects positive outcomes from CBN reforms, experts like Professor Jonathan Aremu warn against complacency. Sustainable gains require a focus on enhancing production capacities and addressing economic factors that influence liquidity and pricing. Confidence and efficiency in the FX market, coupled with properly timed CBN interventions, may support further stability for the Naira in the near term.

Original Source: nannews.ng