Naira steadies as central bank clears backlog of forex demand

The naira closed firmer against the dollar this week, extending a rally that has surprised analysts who spent much of the year forecasting further slides.

Currency dealers in Lagos said the tightening spread between the official window and the parallel market reflected a clearing of unmet foreign-exchange orders that had built up through the first quarter. "The queue is shorter than it has been at any point since last year," one dealer at a tier-one bank said.

Economists caution that stability bought through interventions is not the same as stability earned through export receipts. Non-oil exports remain a small share of total inflows, and the country's reserves buffer is still sensitive to swings in crude prices.

For households, the arithmetic is simpler. A firmer naira eases the cost of imported food, fuel and pharmaceuticals — the three lines that have driven headline inflation for two years. Whether the relief reaches market stalls in Kano and Onitsha will depend on how quickly transport and diesel costs follow.

The bank's monetary policy committee meets again later this quarter. Most analysts polled expect rates to be held, with the committee wary of choking credit to small businesses just as activity picks up.