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Naira sustains rally as reforms, strong reserves boost economy - PUNCH
The naira has extended its winning streak in recent weeks, buoyed by sweeping regulatory reforms, rising foreign exchange reserves, and renewed investor confidence, OLUWAKEMI ABIMBOLA reports
Nigeria’s currency, the naira, sustained a steady rally last week, trading around N1,487/$ at the official Nigerian Foreign Exchange Market. The turnaround, hailed by economists and market watchers, is the product of a strategic blend of foreign exchange reforms, reduced speculative trading, rising reserves, and renewed investor confidence.
At the heart of this shift is the Central Bank of Nigeria under Governor Olayemi Cardoso, whose policies have recalibrated the foreign exchange landscape. According to official data, the naira traded between N1,498/$ and N1,507/$ in the week’s session, marking an improvement from its September opening of N1,526.09/$. The parallel market reflected a similar trend, strengthening to N1,515/$–N1,517/$.
For many analysts, this rally is more than a fleeting gain. It signals the possibility of a structurally stronger naira—provided fiscal and monetary authorities maintain discipline. Analysts at investment firm Commercio Partners highlighted three core factors driving the rebound: Stronger demand for the naira within local markets; Reduced speculative trading, which had previously created volatility; and Improved foreign reserves, which stood at $41.69 billion as of September 12, 2025.
According to the Head of Research at Commercio Partners, Ifeanyi Ubah, these reserves have been steadily climbing in recent weeks, strengthening Nigeria’s external buffers. “With oil earnings supporting inflows, speculative activity subsiding, and reserves growing, the foundation of this rally appears stronger than what we have seen in previous cycles,” Ubah noted.
Still, caution persists. Economists warn that sustaining momentum will depend on consistent macroeconomic discipline, better crude oil production, and a broader diversification of export earnings.
Impact on imports
The ripple effect of a stronger naira is already being felt in trade and commerce. Import costs, long inflated by high exchange rates, are gradually declining. Nigeria’s imports attract various duties and levies—including customs duties, value-added tax, and sundry charges—calculated on the Cost, Insurance, and Freight value of goods. Because these duties are pegged to prevailing exchange rates, fluctuations in forex markets directly shape import prices.
Nigeria imported goods valued at $40.97bn in 2024, with China, Belgium, and India as the main trade partners. More recently, figures from the National Bureau of Statistics showed that in the first quarter of 2025 alone, Nigeria imported food and beverages worth N1.67tn ($1bn), a five per cent rise compared to the same period in 2024.
With the naira stabilising, businesses expect reduced import costs, easing pressures on inflation and household purchasing power.
Parallel to the naira rally, Nigeria’s economic data is also receiving an update. The NBS recently rebased the nation’s Gross Domestic Product, offering a more accurate measure of the economy’s size and structure. According to Afrinvest West Africa Limited, Nigeria’s rebased GDP nominal size now stands at N372.8tn, requiring a 21.9 per cent annual growth rate at N1,500/$ to reach the $1tn economy target by 2031.
The firm’s 20th Banking Sector Report titled “ACT-BOLD: Beyond a Trillion-Dollar Economy” argued that while government confidence in the banking sector’s role is justified, longstanding impediments must be removed to avoid uneven growth.
Statistician-General Adeyemi Adeniran explained that the rebasing captured new economic activities and emerging sectors, including entertainment, technology, and updated consumption baskets. This produced a more complete picture of national output.
Between 2019 and 2024, rebased GDP figures rose from N205.09 trillion to N372.82 trillion, showing consistent growth but also highlighting the changing structure of the economy. Agriculture and services expanded, while industries’ share declined.
Economist Aliyu Ilias stressed that rebasing not only attracts foreign investors but also provides a clearer guide for policy and planning. “It will help the government channel resources more strategically, knowing exactly where the structural strengths and untapped opportunities lie,” he said.
CBN’s forex reforms
Before the reforms, access to forex was one of Nigeria’s most pressing economic bottlenecks. Limited official availability forced businesses and travelers into the parallel market, fueling speculation and widening arbitrage gaps. When the current administration took office in 2023, alongside CBN’s Cardoso, they embarked on bold reforms: liberalisation of the FX market; phasing out CBN financing of fiscal deficits; fuel subsidy reforms; revenue collection strengthening; and inflation control measures.
These steps restored investor confidence, expanded access to forex, and led to Nigeria’s return to international capital markets in December 2023. Rating agencies responded positively, and domestic refiners joined a fully deregulated oil market, adding further stability.
One of the most visible indicators of progress is the jump in reserves. When Cardoso assumed office in October 2023, reserves were weighed down by over $7bn in unfulfilled commitments and a fragmented regime of multiple exchange rates. Since then, gross reserves have strengthened, with the Net FX Reserve rising to $23.11bn—the highest in three years. This was a dramatic leap from $3.99bn at the end of 2023 and $8.19bn in 2022.
NFER adjusts gross reserves for near-term liabilities such as swaps and forwards, giving a truer picture of external buffers. The improvement, according to Cardoso, was no accident but the outcome of deliberate reforms to unify exchange rates, rebuild confidence, and reduce vulnerabilities.
Beyond oil, Nigeria is cultivating new streams of foreign exchange inflows. Diaspora remittances, estimated at $23bn annually, are being harnessed more effectively. The CBN has introduced new product developments to ease diaspora transfers, licenses for additional International Money Transfer Operators, a willing buyer–willing seller model, and improved liquidity frameworks for IMTOs.
According to the President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, these moves reflect Cardoso’s creativity and persistence in boosting inflows. “The result is a stronger and more transparent reserves position that equips Nigeria to withstand external shocks,” Gwadabe said.
Despite the encouraging progress, experts maintain that sustaining the rally is not automatic. Three key conditions must hold: Macroeconomic discipline — fiscal and monetary coordination must remain tight. Oil production stability — as crude remains a dominant FX earner. Export diversification — to shield Nigeria from commodity price swings.
The CBN has committed to transparent reporting, prudent reserve management, and market-driven reforms, while economists stress the need for broad-based growth beyond services and agriculture. Nigeria’s aspiration for a $1tn economy by 2030–2031 is ambitious but achievable. The rebased GDP offers a clearer lens, and the naira’s rally—if sustained—could be a cornerstone of that journey.
Conclusion
The naira’s rally is more than a symbolic recovery. It reflects the impact of reforms, the strength of growing reserves, and the confidence of investors and market participants. Yet, its sustainability hinges on discipline, innovation, and diversification.
For businesses, the rally reduces import costs, boosts predictability, and creates a more stable environment for planning. For government, it provides breathing space to push structural reforms further. For households, it promises relief from inflationary pressures.
In the words of CBN Governor Olayemi Cardoso: “This improvement in our reserves is the result of deliberate policy choices. We remain focused on transparency, discipline, and reforms that build resilience for the long term.”
Nigeria’s economy, long tested by volatility, now faces a unique opportunity. With a stronger naira, deeper reforms, and clearer economic data, the country may finally be charting a pathway toward lasting stability and prosperity.
