The Nigerian Naira ended the trading week on a powerful upswing, reaching its strongest position in approximately two years against the US Dollar at the official foreign exchange market. Data from the Central Bank of Nigeria (CBN) showed the dollar was quoted at N1,386.55, marking a significant milestone since the commencement of the Electronic Foreign Exchange Matching System (EFEMS).
The local currency appreciated by N35.08 week-on-week, a 2.53% gain from the N1,421.63 quoted the previous Friday. On a daily basis, the Naira strengthened by N10.44 (0.75%) on Friday alone. Similarly, at the parallel market, the Naira gained N18 to close at N1,452 per dollar.
This sustained appreciation is underpinned by the steady growth of Nigeria’s external reserves, which rose to $46.17 billion as of January 29, 2026, bolstering the CBN’s capacity to defend the currency.
A new report by Quest Merchant Bank attributes this stability to the cumulative impact of structural FX reforms, improved market transparency, and tightened domestic financial conditions. “Following the sharp dislocations witnessed in 2024, the naira’s performance improved materially, supported by stronger FX liquidity, enhanced price discovery at the Nigerian Autonomous Foreign Exchange Market (NAFEM), and a gradual restoration of offshore investor confidence,” the report noted.
Key to this turnaround has been the settlement of legacy FX obligations and the introduction of the EFEMS, which reduced information asymmetry and narrowed the arbitrage gap between official and parallel markets. Improved confidence has translated into higher FX inflows, with average monthly inflows rising to $3.9 billion in 2025 from $2.6 billion in 2024, driven largely by foreign portfolio investment attracted by high domestic yields.
Additional support came from resilient diaspora remittances, averaging around $5 billion per quarter, and a favorable external environment, including US Federal Reserve rate cuts in 2025 that improved global risk appetite for emerging markets like Nigeria.
Looking ahead to 2026, Quest Merchant Bank analysts expect exchange rate dynamics to remain broadly stable, supported by sustained portfolio inflows, steady remittances, and continued policy discipline, despite potential volatility from oil market fluctuations.
Businessday
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