Naira firms to N1,347 per dollar in the official market as the Fed's rate hold steady global conditions

The naira ended the week's trading in better shape than it began, firming to roughly N1,347 per dollar in the official market on Thursday after slipping to N1,367.61 at the start of the stretch. The currency also carried a modest premium on the parallel market, where it changed hands around N1,380 during the week, leaving a spread that market participants describe as manageable by the standards of the last four years.

The improvement came despite a week of global crosscurrents. The United States Federal Reserve held its benchmark rate at 3.75 to 4 per cent on Wednesday with a statement that described inflation as somewhat elevated, a posture that keeps Treasury yields higher for longer and typically drains risk appetite from emerging-market currencies. The naira, by contrast, moved the other way, supported by improvements in the domestic fundamentals that determine dollar supply rather than by any change in global conditions.

What is driving the currency

Reserve strength is the anchor. Gross external reserves stood at roughly $55.2 billion through late October, the highest reading in 18 years, with net reserves above $45 billion according to recent policy digests. Buffers of that depth change the psychology of the market, because importers and corporates who once hoarded dollars as hedges are now less inclined to chase the currency when supply is predictable. Every barrel of crude above $100 shipping out of Bonny and Qua Iboe adds to that stock, and the higher-for-longer price environment of the past quarter has been a quiet tailwind for the currency all year.

The second driver is managerial. The central bank unified its official windows in 2023, broadened participation in the official market and has since used auction discipline and supplier payment settlements to keep spreads narrow. Businesses surveyed in the bank's September expectations exercise reported that their foreign exchange access had improved enough to change planning horizons, with respondents linking their optimism partly to an expected continuation of the stability window. A tighter monetary policy stance, with a policy rate now at 23 per cent, has reinforced the effect by cooling the demand for imported goods that drives dollar demand.

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Businesses expect modest appreciation

The CBN's September Business Expectations Survey, published at the start of October, found that businesses anticipate the naira to remain stable and record modest appreciation against the dollar across the survey's review periods. Respondents tied their broader optimism to greater economic diversification, expansionary fiscal measures and continued currency stability, and the industry sector recorded the sharpest month-on-month improvement in sentiment. Expectations of that kind are themselves stabilising: when firms stop hedging aggressively against depreciation, they stop adding to the pressure they fear.

Households see the same market differently. The bank's separate household survey recorded depressed consumer sentiment about the economy and family finances, with perceptions of price increases rising again in September even as headline inflation moderated. The gap between corporate and household views of the currency is a familiar one in stabilisation periods, because firms feel the benefit of predictable budgeting before consumers feel cheaper shelves in the market.

What to watch through the final quarter

The currency's next tests are calendar-driven. Year-end demand for dollars typically rises as importers stock up for the festive season and as multinationals remit annual profits, and the ability of reserves to absorb that seasonal pressure will indicate whether N1,347 holds. The Fed's November and December meetings matter too: a global environment that keeps the dollar firm keeps all emerging currencies working harder for every point of stability.

For now the structure of the market is healthier than its recent history. A spread of roughly N33 per dollar between official and parallel rates, reserves that can cover nearly a year of imports and an inflation rate that has eased to 14.63 per cent in September together describe a currency that is no longer living hand to mouth. Nigerian businesses planning their 2027 budgets in naira have stable ground under them for the first time in several years, and that is a change worth more than any single day's quotation.