Market News

written by Bamidele Ogunwusi 

LAGOS  – The naira strengthened further in September, extending its resilience amid the Middle East conflict, as rising foreign capital inflows, elevated crude oil prices and growing external reserves boosted liquidity in Nigeria’s foreign exchange market. 

Data published by the Central Bank of Nigeria (CBN) showed that the currency appreciated by 0.5 per cent month-on-month to close September at N1,329.50 per dollar, bringing its gain in the third quarter of 2026 to 3.5 per cent. 

The currency’s average exchange rate also improved by 1.9 per cent to N1,328.28 per dollar in September from N1,353.41 in August, reflecting sustained stability in the official foreign exchange market. 

The performance comes against the backdrop of heightened global uncertainty and geopolitical tensions in the Middle East, which have increased volatility across international financial markets. 

Nigeria’s foreign exchange market, however, has benefited from improved liquidity and stronger foreign capital inflows, helping to ease pressure on the naira and strengthen investor confidence. 

Foreign portfolio inflows rose to $15.8 billion in the first nine months of 2026, compared with $12.2 billion in the corresponding period of 2025, highlighting sustained foreign investor interest in Nigerian financial assets. 

The inflows have been supported by relatively attractive domestic yields and improving market conditions, which continue to draw offshore investors seeking competitive returns. 

Another major factor supporting the naira is the steady improvement in Nigeria’s external reserves. Gross reserves increased by a cumulative $6.5 billion over the past five months to reach $54.9 billion at the end of September. 

The higher reserves provide a stronger buffer against external shocks and reinforce the country’s capacity to meet foreign exchange obligations, while supporting confidence in the currency market. 

Elevated crude oil prices have also strengthened the outlook for foreign exchange supply, given oil’s importance to Nigeria’s export earnings. Resilient diaspora remittances and continued foreign investor participation are expected to provide additional support. 

The naira’s performance has also been reflected in the parallel market, where the currency appreciated by 1.8 per cent month-on-month to N1,380 per dollar in September. 

The improvement suggests a narrowing gap between the official and parallel market rates, although some divergence remains. The parallel market rate was N50.50 above the official closing rate at the end of September. 

Further underscoring the currency’s relative strength, the World Bank ranked the naira among the better-performing non-CFA African currencies in the second quarter of 2026, despite volatility linked to the Middle East conflict. 

Looking ahead, expectations are that the naira will trade within a relatively narrow range in the near term, provided foreign exchange liquidity remains strong. 

Continued offshore investor participation, attractive yield differentials, higher oil receipts and resilient diaspora remittances are expected to support supply. 

However, persistent demand for dollars from importers, manufacturers and other market participants remains a potential source of pressure. Changes in global investor sentiment, oil prices and geopolitical developments could also affect market conditions. 

Sustaining the naira’s gains will therefore depend on consistent foreign exchange inflows, stronger export earnings and continued confidence in Nigeria’s financial markets.