A financial and strategic management expert, Ololade Adesola, says while recent improvements in economic fundamentals have stabilised the naira, Nigeria is yet to achieve a true exchange rate equilibrium.

She said in Ibadan on Friday that this was due to continued exposure to external shocks.

Ms Adesola, the managing consultant of L.A. Consult Limited, was assessing the status of the naira, inflation and recent monetary policy measures by the Central Bank of Nigeria (CBN).

She said that tighter monetary conditions, improved market transparency, reduced arbitrage opportunities, and growing investor confidence had contributed to the naira’s relative stability in recent months.

“Definitely, there have been improved fundamentals, which have allowed us to have stability in the exchange market.

“But I do not believe that we have reached an equilibrium yet because we are still exposed to external shocks, particularly oil prices and capital inflows,” she said.

According to her, Nigeria remains highly vulnerable to disruptions in global markets because the bulk of its foreign exchange earnings still comes from crude oil exports.

She noted that achieving greater resilience would require significant diversification of the economy through increased non-oil exports, manufacturing, service exports and long-term foreign direct investment.

On monetary policy, Ms Adesola said that moderation in inflation had created room for cautious adjustments to interest rates.

She, however, warned against aggressive rate cuts that could weaken the attractiveness of naira-denominated assets.

She expressed optimism that inflation would continue to ease after the harvest season, attributing the recent uptick in prices largely to seasonal food supply pressures.

“We expect the CBN to continue to make careful and moderate adjustments in rates, not something drastic or significant, so that it does not weaken the attractiveness of the naira,” she said.

The consultant also described the introduction of the Nigerian overnight financing rate (NOFR) as an important step toward deepening the country’s financial markets.

She said that the benchmark would improve the pricing of financial instruments, strengthen liquidity management and provide a clearer reference point for short-term funding and interest-rate products.

According to her, the full impact of the new benchmark will become clearer over time as the market adjusts to its implementation.

Ms Adesola advised investors to focus on real returns rather than nominal returns, stressing that inflation-adjusted performance should guide investment decisions.

She urged portfolio managers and investors to embrace diversification by exploring equities, corporate bonds, infrastructure assets and professionally managed investment funds.

“Fixed-income assets may become less attractive because of inflationary pressures, so investors should diversify their portfolios and explore alternative assets,” she said.

On measures required to sustain long-term confidence in the naira, Ms Adesola identified five critical areas requiring government attention.

These, she said, include improving efficiency in the oil and energy sector, expanding non-oil exports, strengthening infrastructure, reducing dependence on borrowing and ensuring policy consistency.

She specifically called for increased local crude supply to domestic refineries, expansion of agricultural and manufacturing exports, and greater monetisation of Nigeria’s digital economy.

The expert also stressed the need for improved power supply and transportation infrastructure, describing them as key drivers of economic competitiveness and investment attraction.

She expressed concern over the country’s rising debt profile, saying government borrowing had become unsustainable and should be replaced by stronger revenue mobilisation efforts.

According to her, investor confidence can only be sustained when policies are transparent, predictable and consistently implemented.

“Policy consistency and credibility are essential so that investors can trust that decisions they make today will not be undermined by sudden policy changes tomorrow,” she said. 

(NAN)