Nigerian Naira Appreciates 4.7% in Seven Months Amid CBN Interventions

The Nigerian naira has experienced a significant appreciation in value over the past seven months, gaining about 4.7% against the US dollar. This rise is attributed to the Central Bank of Nigeria's (CBN) series of foreign exchange interventions, as well as inflows from yield-seeking foreign portfolio investors and exporters.

According to Cordros Capital Limited, a strong current account position and resilient FPI inflows have contributed to the naira's stability. However, the investment firm notes that demand pressures remain subdued, limiting the scope for further gains.

The naira's peak value of N1335 was reached in February, following a combination of strong foreign portfolio inflows, US dollar weakness, and attractive carry opportunities. The onset of the US-Iran conflict in late February temporarily triggered pressure on the currency, but it quickly retraced its losses and traded within a narrow band.

Cordros Capital Limited's model suggests that the naira remains slightly undervalued, with an estimated fair value of N1,350.20 to the US dollar compared to the current average exchange rate of N1,377.75 per dollar. This implies that the naira has moved closer to fair value, limiting its potential for further appreciation.