Market News

BY Hope Moses-Ashike 

The naira appreciated significantly in the official foreign exchange (FX) market in September, recording a N50.75 gain against the dollar.

At the close of trading on Tuesday, the naira strengthened to N1,475.34 per dollar, a 3.3 percent gain from N1,526.09/$ at the start of the month, according to data from the Central Bank of Nigeria (CBN).

On a day-to-day basis, the local currency also appreciated slightly by 0.07 percent or N1.00, up from N1,476.34/$ on Monday at the Nigerian Foreign Exchange Market (NFEM), CBN data showed.

In the parallel market, commonly referred to as the black market, the naira gained 3 percent over the month, closing at N1,495 on Tuesday compared to N1,540 at the beginning of September.

Nigeria’s external reserves also rose, reaching $42.32 billion as of September 29, 2025, an increase of 2.17 percent from $41.42 billion at the start of the month.

Bala Moh’d Bello, a member of the Monetary Policy Committee (MPC), stated that the naira’s relative stability reflects the impact of tighter liquidity, growing investor confidence, and recent reforms in FX management.

He added that speculative activity in the FX market has declined significantly, enhancing transparency and supporting market-based price discovery. According to him, this stability is expected to continue in the medium term, underpinned by rising reserves, which stood at $40.11 billion as of July 18, 2025, enough to cover about 9.5 months of imports.

Another MPC member, Aloysius Uche Ordu, said the naira’s appreciation and the narrowing gap between official and Bureau de Change (BDC) rates highlight improved FX liquidity. He credited strong remittances and foreign portfolio inflows for the boost in reserves, also noted at $40.11 billion in July.

The CBN’s latest quarterly economic report showed total FX inflows rose by 4 percent quarter-on-quarter (q/q) and 26 percent year-on-year (y/y) to $29 billion in Q1 2025. This continues a trend seen since Q4 2023, mainly driven by the CBN’s tight monetary stance.

However, FX outflows climbed at a faster pace, rising 14 percent q/q and 33 percent y/y to $13.8 billion, marking the highest quarterly outflow since Q2 2020. As a result, net FX flows stood at $15.2 billion in Q1 2025, slightly down from $15.8 billion in Q4 2024.

Analysts at FBNQuest noted that robust FX inflows in Q1 2025 were primarily fueled by autonomous sources, which surged to $20.7 billion from $16.3 billion in Q4 2024, the highest since the COVID-19 pandemic, though still below the $27.5 billion recorded in Q1 2020.

They attributed the increase to higher market interest rates that spurred carry trade flows, along with CBN’s FX reforms that improved transparency and price discovery. Although the CBN does not disclose a detailed breakdown, FMDQ data used as a proxy showed foreign portfolio investment (FPI) inflows rose 40 percent q/q and 101 percent y/y to $4.9 billion.