Market News

The Nigerian naira has recorded its strongest gain in seven months, buoyed by a more robust foreign reserves that saw a $4.1 billion rise between July and August.

Data from the Central Bank of Nigeria (CBN) showed that the naira rose to N1,506.08 to a dollar on Wednesday at the Nigerian Foreign Exchange Market (NFEM). The last time it was that strong was on the 5th of March, 2025, when it closed at N1,500.80/$.

The naira has continued to enjoy rare stability, driven by the various policies of the apex Bank, including maintaining a high interest rate, a move that has lured in foreign capital and made the currency firmer.

Nigeria’s naira has witnessed some turbulence years after the authorities relaxed currency controls, effectively floating the currency to be more determined by market forces. That saw the unit fall by over 70 percent and disrupted business plans of many firms in Africa’s most populous nation.

But those eras of sharp swings are phasing out as the local currency is expected to continue its rally until the end of the year, with global investment bank JP Morgan forecasting the naira to close 2025 at N1,450 per dollar.

A potential rate cut by the United States Federal Reserve also bodes well for the naira’s long-term stability as global capital finds its way into emerging markets like Nigeria, further bolstering the calmness of the currency.

“A lower US interest rate would diminish the relative attractiveness of US assets, prompting global investors to seek higher returns in emerging markets like Nigeria. Consequently, Nigeria will likely experience increased portfolio inflows, particularly into the fixed-income market,” analysts at FBNQuest Merchant Bank wrote in a note recently.

“Renewed interest by offshore investors could potentially bolster foreign exchange reserves and support the stability of the Naira.”

FX reserves seen rising further on likely US rate cut

Nigeria’s gross external reserves is projected to further rise on a likely US rate cut that could push in more foreign inflows into Africa’s biggest crude oil producer.

“Nigeria’s external reserve position could be further supported by fresh capital inflows if the US Federal Reserve begins to ease monetary policy in response to softening labour market conditions,” FBNQuest said in a note on Wednesday.

The FX reserves rose to $41.3 billion, the highest since December 2022, driven by a rebound in crude oil production to 1.7 million barrels/day (mb/d), up from an average of 1.55 mb/d in 2024, stronger foreign capital inflows due to elevated interest rates and rising non-oil exports, as well as strong inflows from non-bank corporates.

The current reserves position covers 12.4 months of merchandise imports per the balance of payments for the 12 months to December 2025, and 8.6 months when imported services are added.