Market News

 by Collins Nweze | Assistant Business Editor

Forex speculation is at an all-time low, with the gap between official and parallel market exchange rates narrowing steadily. The naira has sustained a strong rally in recent months, trading at N1,455/$ in the parallel market and N1,475/$ at the official window — a modest difference of just N20. This stability, alongside the surge in Nigeria’s foreign reserves to $43.05 billion, reflects growing market confidence. The decline in speculative activity, coupled with improved forex liquidity, suggests that the Central Bank of Nigeria (CBN)’s economic reforms are gaining traction and delivering tangible results across the financial ecosystem, reports Assistant Editor COLLINS NWEZE 

For years, speculative trading in the foreign exchange (forex) market posed a major setback for the Nigerian naira, discouraging capital inflows and weakening the domestic economy. However, that trend is changing — and for the better. After a turbulent past marked by significant value loss, the naira is now showing strong signs of recovery, thanks to a mix of structural reforms and renewed investor confidence. 

This recovery is being attributed to a range of interlinked factors — from a growing demand for the naira to a marked reduction in speculative trading. Equally important is the consistent rise in Nigeria’s foreign reserves, which currently stand at $43.05 billion, signaling improved economic confidence. Central to this turnaround are the far-reaching forex reforms introduced by the Central Bank of Nigeria (CBN) under the leadership of Governor Olayemi Cardoso. These reforms are beginning to yield significant results, particularly in curbing speculative practices and closing the gap between the official and parallel market exchange rates. The CBN has also intensified its commitment to stabilizing the currency by increasing foreign exchange supply to retail end-users, minimizing distortions in the market, and maintaining effective foreign reserves management.

The injection of liquidity into the forex market, combined with rising compliance with regulatory policies, has helped to ease the pressure on the naira and restore investor confidence. This renewed confidence is attracting more foreign portfolio investments and encouraging the participation of international oil companies, both of which are contributing to greater forex inflows. There is also growing interest from foreign investors, supported by improved market transparency, a more efficient FX framework, and strengthening macroeconomic fundamentals. As a result, Nigeria’s external reserves have continued to rise. CBN Governor Cardoso recently disclosed that the gross external reserves stood at $43.05 billion as of September 11, 2025, compared to $40.51 billion at the end of July 2025 — providing an import cover of 8.28 months and reinforcing the growing stability of the naira.

“Similarly, the second quarter 2025 current account balance recorded a significant surplus of $5.28 billion compared with $2.85 billion in first quarter of 2025,” Cardoso stated during the 302nd monetary policy committee meeting held this week in Abuja.

Powered by VidCrunch

FX speculations dip

A Bureaux De Change (BDC) trader based in Marina, central Lagos, Garuba Sarki, said many dealers lost huge funds as they sold below purchase rates as exchange rate gap narrowed. “I know some BDC operators that sold dollars below the purchasing rate. This is expected to continue in the weeks ahead. Also, the expected dollar inflows to the economy will help strengthen the naira position against the dollar,” he said. 

Analysts at Commercio Partners, attributed the rally and gradual narrowing of the exchange rate gap to a combination of stronger demand for the naira, reduced speculative trading, and improved foreign reserves. Head of Research at Commercio Partners, Ifeanyi Ubah, expressed optimism that the positive sentiment would be sustained in the near term, supported by increasing external buffers. “Nigeria’s rising external reserves are reflecting a healthier external position for the country. With reserves strengthening, speculative activity subsiding, and oil earnings supporting inflows, many market watchers believe the naira’s current rally has a stronger foundation compared to previous cycles of volatility,” he said.

However, other experts caution that sustaining this momentum will depend on the government’s ability to maintain macroeconomic discipline, boost crude oil production, and diversify export earnings. President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, attributed the ongoing stability of the naira against dollar and other world currencies to the CBN’s policies. Gwadabe said key policies like the Foreign Exchange (FX) Code, rising investors confidence, and foreign direct investment supporting policies are effectively putting FX speculators in check. He said the FX Code implementation is comprehensively addressing various aspects of market conduct and practices. For instance, the policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted.

Gwadabe said the code further entrenches transparency and accountability in the FX market, and continually sustain naira stability and rally. He also backed CBN’s position that all institutions engaged in the foreign exchange market must also provide the CBN with a detailed implementation plan outlining how they intend to achieve full compliance with the FX Code. This plans are expected to be formally approved and signed by the institution’s board of directors, and it must be accompanied by relevant extracts from the board meeting where the plan was reviewed and endorsed.

Cardoso, had at the launch of the Nigeria Foreign Exchange Code (FX Code), emphasised integrity, fairness, transparency, and efficiency as critical pillars for driving Nigeria’s economic growth and stability. He said that the FX Code was built on six core principles: ethics, governance, execution, information sharing, risk management and compliance, as well as confirmation and settlement processes. These principles, he explained, aligned with international standards while addressing the unique challenges within Nigeria’s foreign exchange market.

According to Cardoso, “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”

Besides FX Code, the apex bank also introduced the Electronic Foreign Exchange Matching System (EFEMS), which has proven effective in other economies in enhancing the functionality of the foreign exchange market. The EFEMS was meant to check forex market distortions, eliminate speculative activities and instill transparency. The EFEMS, which is commonplace in developed and developing markets offers real-time information on currency rates, trading volumes, and market activity.

Additionally, the CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment. These reforms and developments reflect the bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance. Gwadabe, said the policy shifts showed the level of creativity, policy and hard work the Cardoso puts in ensuring that more forex flows into the economy and remain accessible to businesses.

How it started

Cardoso had upon assuming office in October 2023, prioritized reforms to rebuild Nigeria’s economic buffers and strengthen resilience. In the foreign exchange market, the apex bank faced a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime characterised by multiple forex rates, which had encouraged arbitrage opportunities. “Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso said.

Foreign capital inflows to the domestic economy remains crucial elements in the drive to achieve monetary and fiscal policy stability. The apex bank is cultivating more sources of FX to increase dollar inflows, boost access to manufacturers and retail end users. From moves to boost diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the CBN has simplified dollar-inflow channels for FX dealers to boost business and economic growth.

Policies supporting remittances inflows

As part of its efforts to boost diaspora remittances and support naira stability, the CBN recently announced the introduction of two new financial products designed to serve Nigerians living abroad. The Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account was created to streamline remittances, encourage investments, and foster financial inclusion among Nigerians in the diaspora. It said, “The Central Bank of Nigeria is pleased to inform the general public of the introduction of the Non-Resident Nigerian Ordinary Account and Non-Resident Nigerian Investment Account targeted at Nigerians in diaspora.”

The initiative is also expected to provide a secure and efficient platform for managing funds and investing in Nigeria’s financial markets. Since the beginning of this year, eligible NRNs have continued to get the opportunity to own any of the Non-resident Nigerian accounts. The Non-Resident Nigerian Ordinary Account was designed to facilitate remittances by allowing non-resident Nigerians to remit foreign earnings into Nigeria and manage funds in foreign currency or naira. Deposits from sources such as salaries, allowances, and dividends are supported, alongside spending on family maintenance, education, and healthcare.

On the other hand, the Non-Resident Nigerian Investment Account provides an opportunity for NRNs to invest in Nigeria’s financial markets, including foreign currency-denominated bonds, fixed deposits, and local assets like equities, government securities, and mortgage products. The CBN explained that both accounts offer currency flexibility, enabling holders to maintain balances in either foreign currency or naira. Account holders will also be able to convert funds between the two currencies at prevailing exchange rates through authorised dealers.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year. The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth. In a report: “Diaspora remittances: The power behind Africa’s sustainable growth”, Regional Vice President of Africa at Western Union, Mohamed Touhami el Ouazzani, said remittances may be measured through the movement of money, but their real impact is measured in lives changed. He disclosed that in 2023 alone, $90 billion flowed into Africa from its global diaspora, an amount that rivals the Gross Domestic Product of entire nations. He said that remittances symbolize deep ties that keep communities connected across borders. “Families with a breadwinner working abroad depend on these funds to provide vital support for day-to-day needs. They also build the foundation for broader financial stability,” he said.

For remittances to be truly transformational, it begins with understanding and meeting people’s aspirations. Ensuring individuals who strive for more can send and receive funds, regardless of their financial status, is crucial. We must cater to diverse needs. “In a continent renowned for its entrepreneurial spirit, offering multiple channels for remittance access is key. Whether through bank accounts, digital wallets, mobile money apps, or cash pickups, this flexibility ensures that funds are delivered in ways that best suit local realities. Providing innovative and inclusive solutions empowers individuals to not only manage their immediate needs but also to invest in long-term growth opportunities,” he added.