Nigerian economists have expressed optimism that the recent appreciation of the Naira against the dollar could lead to lower prices for imported goods, potentially reducing the country’s inflation rate, which stood at 33.88% in October 2024.
Experts, including Gbolade Idakolo, CEO of SD & D Capital Management, and Professor Godwin Oyedokun of Lead City University, noted the Naira’s recent gains. On December 9, 2024, the currency traded at N1,538.50 per dollar, a notable improvement from N1,740 on November 9. This represents a month-on-month gain of N201.5 and N110 in official and parallel markets, respectively.
Despite this progress, the Naira experienced slight depreciation at the start of the week, losing N3.5 and N30 in both markets. Analysts attribute the broader improvement to the Central Bank of Nigeria’s (CBN) launch of the Electronic Foreign Exchange Matching System (EFEMS), which aims to enhance transparency and reduce market distortions.
Idakolo emphasized EFEMS’ potential to stabilize the forex market by reducing speculation in the parallel market. He highlighted its impact on import duties, noting that lower exchange rates for clearing costs could translate to reduced prices for imported goods.
He stated, “The EFEMS platform introduced by the CBN is a game changer due to its transparency and centralized bidding. It has reduced speculative activities that previously weakened the Naira. If properly monitored, this system could significantly influence import duty rates and ultimately lower the prices of imported goods.”
Professor Oyedokun linked the Naira’s recovery to increased forex inflows and decreased demand for dollars. He suggested that the strengthened currency might indirectly lead to reduced costs for imported goods, provided importers pass on the benefits to consumers. However, he cautioned that factors such as global supply chain disruptions, domestic economic conditions, and importer behavior could moderate these effects.
To sustain the Naira’s appreciation, both experts called for consistent CBN interventions and broader efforts to address Nigeria’s structural challenges. Oyedokun noted that macroeconomic stability, foreign investment attraction, and infrastructure development would be critical to ensuring the long-term strength of the currency.
While the recent gains are promising, economists warned that exchange rate fluctuations depend on various factors, requiring continuous monitoring and strategic policy interventions to maintain stability.
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