The naira strengthened to N1,365 against the dollar on Thursday, supported by a broad weakening of the greenback in global markets, according to data from the Central Bank of Nigeria.
As investor mood shifted away from the dollar, the local currency rose from N1,369, noted a day earlier, to a range of N1,351.5 to N1,365. Driven by reduced geopolitical tensions and fresh optimism about world oil supply, the U.S. currency is registering its most significant weekly drop since January.
Overseas markets and major currencies gained ground; the euro, pound, and commodity-linked currencies progressed as investors lessened safe-haven holdings.
The change comes after a ceasefire agreement between Washington and Tehran, which has eased concerns about disruptions to the Strait of Hormuz.
With Nigeria’s foreign reserves still trending downward, falling to $48.89 billion in early April, The News Chronicle gathered that the recent recovery of the naira is mostly connected to external conditions rather than underlying domestic factors.
Stable oil flows and the result of current diplomatic negotiations will determine sustained gains, according to experts.
Although the dollar rose in March amid increased tensions, recent events have reversed that trend, therefore providing breathing room for emerging market currencies such as the naira.
Market observers point out that the question now is whether the reduced tensions can last long enough to promote more currency stability.
