The naira maintained its upward momentum across Nigeria’s foreign exchange (FX) market the past week despite renewed strength in the US dollar, highlighting the growing influence of improved domestic liquidity, stronger external reserves and sustained investor confidence in the Central Bank of Nigeria’s (CBN) foreign exchange reforms.
Ordinarily, a strengthening dollar exerts pressure on emerging market currencies, including the naira, by making dollar-denominated assets more attractive to global investors and increasing the cost of imports. However, Nigeria’s foreign exchange market has proved relatively resilient, supported by increased dollar liquidity and improved market confidence.
Why is the dollar strengthening globally?
The resilience of the naira is particularly noteworthy because it comes at a time when the US dollar is strengthening against most major and emerging market currencies.
J.P. Morgan Global Research recently upgraded its outlook for the US dollar, citing expectations of a more hawkish US Federal Reserve and continued resilience
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