The naira has appreciated significantly in recent weeks, driven by increased dollar inflows and improved market liquidity. According to data published by the Central Bank of Nigeria, the naira strengthened by 24.68 percent or N328.72 to N1,331.77 per dollar on Wednesday, from N1,660.49 quoted on October 18, 2024. This represents a considerable gain for the local currency, which has been under pressure in recent years.
The parallel market, also known as the black market, has also seen significant gains for the naira. Data collated from black-market operators showed that the naira has gained 25.55 percent, or N350, from N1,720 per dollar traded in 2024. On a day-on-day basis, however, the local currency traded at about N1,370 per dollar on Wednesday. The improvement in the naira's value has been attributed to various factors, including increased foreign exchange inflows and improved confidence in the market-based foreign exchange framework.
Nigeria's external reserves have also maintained a steady growth trajectory, rising to $54.98 billion as of October 6, 2026. This represents a 24.68 percent increase compared to $42.54 billion recorded in the corresponding period of 2025, according to data published on the Central Bank of Nigeria website. The increase in external reserves has provided the Central Bank with the firepower to defend the naira and meet other external obligations.
A report by FSDH Merchant Bank noted that the naira strengthened from around N1,650 per dollar in December 2024 to N1,329 per dollar on September 24, 2026. The report also stated that exchange rate volatility has moderated significantly compared with the sharp fluctuations recorded in 2025 and early 2026. The appreciation of the naira reflects stronger autonomous foreign exchange supply, rising external reserves, and improved confidence in the market-based foreign exchange framework.
The Central Bank of Nigeria has attributed the stability in the foreign exchange market to its foreign exchange reforms, alongside tighter monetary policy and improved liquidity management. Deputy Governor of the Central Bank, Muhammad Sani Abdullahi, stated that the improvement in foreign exchange supply had contributed to greater stability in the market. He also noted that the sources of foreign exchange inflows had changed significantly, with autonomous sources accounting for nearly 68 percent of total inflows recorded in July 2026.
Remittances through International Money Transfer Operators reached $950 million during July 2026, while net foreign portfolio inflows totalled $6.31 billion between January and August 2026. Although portfolio flows can reverse quickly, Abdullahi stated that the broader improvement in foreign exchange supply had reduced the market's reliance on direct Central Bank intervention. Nigeria's external buffers have also strengthened, with gross external reserves standing at $55.60 billion as of September 11, 2026.
The durability of the naira's gains will depend on whether Nigeria can sustain improvements in foreign exchange supply while reducing its exposure to volatile capital flows. Analysts have warned that the composition of foreign exchange inflows remains important, given the substantial contribution from portfolio investors. While stronger reserves and external balances provide policy flexibility, they do not eliminate Nigeria's vulnerability to shifts in global risk and investor sentiment.
Key points
- The naira has strengthened to a two-year high of N1,331.77 per dollar in the official foreign exchange market.
- Nigeria's external reserves have risen to $54.98 billion as of October 6, 2026.
- The Central Bank of Nigeria has attributed the stability in the foreign exchange market to its foreign exchange reforms and tighter monetary policy.
