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The naira is expected to remain stable, supported by improved foreign exchange (FX) liquidity and a more efficient FX market. Analysts anticipate continued inflows from foreign portfolio investors (FPIs), driven by growing market confidence. In addition, rising non-oil exports and limited opportunities for naira speculation are likely to sustain steady domestic inflows, reports Assistant Editor COLLINS NWEZE 

The long-term stability of the naira is increasingly being projected, supported by rising foreign capital inflows and a significant boost in Nigeria’s foreign exchange reserves. Over the past week alone, the naira appreciated by 1.1 per cent to N1,520.00/$, driven by the Central Bank of Nigeria’s (CBN) intervention of $50 million and heightened interest from Foreign Portfolio Investors (FPIs) following a successful Open Market Operation (OMO) auction. 

Dr. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), emphasized that with consistent foreign exchange inflows, the naira’s long-term stability appears increasingly assured. Recent data from the National Bureau of Statistics (NBS) revealed that capital inflows reached $5.6 billion in Q1 2025, a clear indication of renewed investor confidence. The banking sector attracted $3.1 billion—representing 55.44 per cent of total inflows—highlighting the positive impact of reforms implemented by the CBN to attract both local and foreign investors.

Analysts at Cordros Securities echoed this optimism, pointing out that Nigeria’s gross external reserves have now climbed to their highest level since December 2021. Reserves increased by $353.47 million in one week to reach $41.08 billion on August 21, and further edged up to $41.10 billion by August 22. Earlier in the month, reserves stood at $40.72 billion as of August 13, largely fueled by rising FX inflows and a modest uptick in crude oil production.

CBN data also showed a consistent upward trend in reserve levels: from a daily average of $39.3 billion on August 1, to $39.5 billion by August 6, and then $40.2 billion on August 8. These gains have coincided with positive macroeconomic indicators. Inflation has continued to decline, closing July at 21.88 per cent, while global commodity prices are moderating. The ongoing fiscal and monetary reforms—led by CBN Governor Olayemi Cardoso—are credited with driving FX market liberalization, improving transparency, and boosting local production.

Dr. Gwadabe noted that the CBN has been diversifying FX sources to increase dollar supply and improve access for both manufacturers and retail users. The outlook remains optimistic, with expectations that the apex bank will maintain its reform momentum while fiscal authorities deepen efforts to boost FX earnings from oil, gas, and non-oil exports. “From moves to improve 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 apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain,” he said.

How it started

 The Central Bank of Nigeria (CBN), under the leadership of Governor Olayemi Cardoso, has implemented a series of bold reforms aimed at attracting foreign capital, stabilizing prices, and strengthening the naira. These reforms, in coordination with broader fiscal measures by the federal government, have marked a significant turning point for Nigeria’s economic trajectory.

In 2023, the new administration initiated sweeping changes to reposition the economy. These included the liberalization of the foreign exchange market, the discontinuation of CBN financing of the fiscal deficit, and the full deregulation of fuel subsidies. At the same time, the government undertook measures to strengthen revenue mobilization and tackle the rising inflation rate through targeted fiscal discipline.

Since the rollout of these reforms, Nigeria’s international reserves have witnessed a notable increase, and access to foreign exchange through the official market has significantly improved. For the first time in years, both individuals and businesses can access forex transparently, without depending solely on parallel market channels.

These efforts have restored investor confidence. Nigeria successfully returned to the international capital markets in December 2024 and has since received credit rating upgrades from major global agencies. A major milestone in this economic reset is the launch of a large-scale domestic private refinery, which is expected to move Nigeria higher up the oil and gas value chain and enhance self-sufficiency in a deregulated market.

CBN’s currency and forex reforms have also triggered renewed foreign investment inflows, while reducing the need for constant interventions in the forex market. The unification of multiple exchange rates and the clearance of the over $7 billion backlog of unmet forex obligations have been described by multilateral institutions, including the World Bank, as bold and necessary steps toward long-term economic sustainability.

These interventions have positively impacted Nigeria’s global risk profile. The country’s sovereign risk spread has dropped to its lowest point since January 2020, effectively erasing much of the premium built up during the COVID-19 pandemic and subsequent economic disruptions.

Altogether, these deliberate reforms by both the CBN and the federal government are part of a larger strategy to stabilize the macroeconomic environment, restore investor confidence, and ensure steady capital inflows essential for long-term growth and resilience.

More foreign capitals flow in

 According to the latest “Nigeria Capital Importation Q1 2025” report released represents 10.86 per cent surge from the $5.1 billion reported in fourth quarter of 2024. “In Q1 2025, total capital importation into Nigeria stood at US$5642.07 million, higher than $3.37 billion recorded in Q1 2024, indicating an increase of 67.12  per cent. In comparison to the preceding quarter, capital importation increased by 10.86 per cent from $5.08 billion in Q4 2024,” the report stated.

The NBS also stated that portfolio investment ranked top with $5.2 billion, accounting for 92.25 per cent, followed by other investment with $311.17 million, accounting for 5.52 per cent. The report indicated that, “Foreign Direct Investment recorded the least with $126.29 million accounting for 2.24 per cent of total capital importation in Q1 2025.”

According to the NBS, the banking sector took the lead with the highest inflows in Q1 2025. The report stated, “The Banking sector recorded the highest inflow with $3.1 billion, representing 55.44 per cent of total capital imported in Q1 2025, followed by the Financing sector, valued at $2.09 billion (37.18 per cent), and Production/Manufacturing sector with $129.92 million (2.30 per cent).”

The report further noted that capital importation during the reference period originated largely from the United Kingdom with $3681.96 million, showing 65.26 per cent of the total capital imported. In emailed note to investors, Managing Director, Afrinvest West Africa Limited, Ike Chioke, explained that Portfolio Investment (92.2 per cent of total capital) dominated flows, rising by 30.1 per cent quarter-on-quarter,  and 150.8 per cent year-on-year to $5.2 billion. The bulk of the FPI flows was to Money market instruments (up 162.2 per cent year-on-year to $4.2 billion), while Bonds (up 108.5 per cent) and Equities (up 137.7 per cent) attracted $877.4 million and $117.3 million respectively.

Opportunities in GDP numbers

 Nigeria’s hope of achieving $1 trillion economy by 2030 will gain significant support from the banking sector. Nigeria’s statistician-general, Adeyemi Adeniran, had explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09 trillion N213.63 trillion in 2020, N243.30 trillion in 2021, N274.23 trillion in 2022, N314.02 trillion in 2023, and N372.82 trillion in 2024”.

The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023 and 35.4 per cent in 2024.

“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS said.

Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

How the banks stand

 A well-recapitalised banking sector is undeniably crucial for the growth of the domestic economy. Hence, Olayemi Cardoso, Central Bank of Nigeria (CBN) governor, advised banks to prepare for a new round of recapitalisation to ensure they have the necessary capital to support the Federal Government’s plan to achieve $1 trillion Gross Domestic Product (GDP)  target by 2030.

He said that President Bola Ahmed Tinubu’s economic plan aims to reach a $1tr GDP by 2030, emphasising that the current bank capitalisation is insufficient to support such a large economic scale. Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1tr economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth.”

The Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies. Adeniran revealed that incorporated new and emerging sectors, consumption baskets update, and data collection refining methods helped produce a more complete picture of national output.

Aliyu Ilias, developmental economist, noted that several sectors have previously remained uncaptured in official data, particularly entertainment. “By rebasing our GDP now, included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide government resource allocation. “It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.”

“Finally,” he added, “it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort.”

More so,  while the US President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most-populous nation. “Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the stable naira.

“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.

“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg.

“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.

Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment expected to boost non-oil FX earnings and diversify external inflows. The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.