A financial and strategic management specialist, Mrs Ololade Adesola, has said that although recent macroeconomic improvements have supported relative stability of the naira, Nigeria is yet to attain a true exchange rate equilibrium due to persistent exposure to external market pressures.
Adesola made this known on Friday in Ibadan while speaking on developments in the foreign exchange market, inflation trends and recent monetary policy actions by the Central Bank of Nigeria.
She explained that tighter monetary policy conditions, improved transparency in the forex market, reduced arbitrage activities and rising investor confidence have all contributed to the naira’s recent stability.
However, she noted that the currency remains vulnerable to global economic shocks, particularly fluctuations in crude oil prices and capital flow volatility.
“There have been improvements in the underlying fundamentals, which have helped stabilise the exchange market.
“However, I would not say we have reached equilibrium yet because the economy is still exposed to external shocks, especially oil price movements and capital inflows,” she said.
She further explained that Nigeria’s dependence on crude oil exports for foreign exchange earnings continues to heighten its exposure to global market disruptions.
According to her, strengthening economic resilience will require deliberate diversification through expansion of non oil exports, manufacturing output, services export growth and sustained foreign direct investment inflows.
On monetary policy direction, she observed that easing inflationary pressure has created room for cautious adjustments in interest rates, but warned against sharp rate cuts that could reduce the attractiveness of naira denominated assets.
She projected that inflation could moderate further following improved food supply after the harvest season, noting that recent price increases were largely driven by seasonal factors.
She also expressed support for the introduction of the Nigerian Overnight Financing Rate as a step toward deepening financial market development.
According to her, the benchmark will enhance pricing efficiency, improve liquidity management and provide a clearer reference for short term financial transactions.
She added that the full impact of the new benchmark will become more evident as market participants adjust to its use over time.
Adesola advised investors to prioritise real returns after inflation rather than nominal gains, urging them to adopt more diversified investment strategies.
She recommended broader portfolio allocation across equities, corporate bonds, infrastructure investments and professionally managed funds.
She also noted that fixed income instruments may lose some attractiveness in an inflationary environment, making diversification more important for investors seeking stable returns.
On sustaining long term confidence in the naira, she identified key policy priorities including improved efficiency in the oil and energy sector, expansion of non oil exports, infrastructure development, reduced borrowing dependence and consistent policy implementation.
She called for increased domestic crude supply to local refineries, stronger agricultural and manufacturing exports and better monetisation of the digital economy.
She further emphasised the importance of reliable power supply and efficient transportation systems as critical drivers of competitiveness and investment growth.
She expressed concern over rising public debt levels, describing them as unsustainable and urging a shift toward stronger internally generated revenue.
She concluded that investor confidence depends heavily on policy stability, transparency and predictable decision making that is not undermined by abrupt changes.