Nigeria’s foreign exchange market remains unsettled despite recent actions by the Central Bank of Nigeria (CBN), according to a new report from Fitch Ratings.

The London-based ratings agency affirmed Nigeria’s long-term foreign-currency issuer default rating at ‘B-’ with a positive outlook but flagged potential future challenges. While the CBN has made substantial efforts to boost FX liquidity and stabilise the Naira, market volatility continues, adding pressure on both businesses and consumers, the report said. 

The CBN’s initiatives include the planned launch of an electronic FX matching platform by December 2024 to enhance real-time pricing transparency. The central bank has also raised its monetary policy rate by a cumulative 850 basis points (bps) since February 2024 to 27.25%, aiming to attract foreign capital and counter inflation.

However, Fitch warns these measures may not suffice to fully stabilise the Naira, which remains one of the world’s weakest-performing currencies. “Fitch believes that the FX market has yet to stabilise, and the ongoing flexibility of the exchange rate remains to be tested,” the agency said.

Nigeria’s FX reserves have recently rebounded, reaching $39bn in October from a low of $32.1bn in April. Fitch attributes this increase to improved trade balances, remittances, and disbursements. However, the agency cautions that net reserves may be overstated, as a considerable portion is tied up in FX swaps with local banks. Nigeria’s reserves are expected to cover 6.1 months of external payments by the end of 2024, though uncertainties remain regarding sustained support.

This statement follows the release of Stanbic IBTC Bank’s latest Purchasing Managers’ Index (PMI), which reported rising operational costs, driven mainly by higher import prices and inflationary pressures in fuel and transportation. The PMI dropped to 46.9 in October—a 19-month low—as businesses grapple with increasing costs and declining demand.