The Naira strengthened against the Dollar, trading at N1,492.49 on Friday, marking a 0.44 percent increase due to CBN reforms aimed at transparency in the foreign exchange market. While analysts praise the improvements, Professor Jonathan Aremu warns against premature celebrations, suggesting that increased production is necessary to sustain these gains as foreign exchange reserves decline and demand pressures persist.
On Friday, the Naira appreciated in the official market, trading at N1,492.49 against the Dollar. This represents a gain of N6.57, or a 0.44 percent increase, from the previous close of N1,499.07 on February 27, and is a continuation of the Naira’s relative stability following Central Bank of Nigeria (CBN) reforms aimed at enhancing transparency in the foreign exchange market. Analysts have commended the CBN for the Naira’s steady progress since December 2024.
Despite the gains, Professor Jonathan Aremu, a retired Director from the CBN and a noted academic in international economic relations, cautions that it may be premature to celebrate the Naira’s appreciation. He stresses the necessity for increased production to sustain these gains and argues for a broader focus beyond monetary policy.
Professor Aremu states, “But it may not be time to celebrate yet because, within this period, we have also seen moments when the Naira depreciated.” He emphasizes that maintaining a stable Naira requires a strategic approach that boosts productive capacity alongside managing interest rates and liquidity factors.
He elaborates on the economic principle that the money supply must correlate with transaction volumes and population value for the expected appreciation to hold. Aremu asserts, “Focusing only on monetary policy is insufficient. More emphasis should be placed on increasing production,” suggesting that expanding production can further diminish the value of foreign currencies.
Additionally, a report from Cordros Securities attributes the Naira’s upward trend to reduced demand pressure even as foreign exchange reserves continue to decline, falling to $38.46 billion. The report expresses optimism that foreign exchange liquidity will remain strong due to improved market efficiency and confidence, enabling continued inflows from autonomous sources while predicting CBN interventions during periods of volatility.
In conclusion, the recent appreciation of the Naira is a commendable result of CBN reforms yet should be approached with caution. Increased production and broader economic strategies are essential to maintain its value against foreign currencies. The insights from Professor Aremu highlight the importance of sustainable economic practices over solely relying on monetary policy. Continued assessments of the foreign exchange landscape will be crucial for the Naira’s stability.
Original Source: nannews.ng
