Naira Strengthens Below ₦1,500/$ Amid Rising FX Inflows and Growing Reserves

Nigeria’s naira on Monday posted a significant recovery against the United States dollar, trading below the ₦1,500/$ mark for the first time in more than six months. The Central Bank of Nigeria (CBN) reported that the domestic currency closed at ₦1,497.46/$, up from ₦1,501.49/$ in the previous session, representing a 0.27% gain. This marks a notable shift after weeks of the naira hovering just above the ₦1,500/$ threshold.

The rebound was not limited to the official market. In the parallel market, the naira strengthened by 0.33% to ₦1,535/$, according to CardinalStone Research. Analysts noted that the naira also posted a 0.98% week-on-week gain in the official window, suggesting growing confidence among investors and traders. The narrowing gap between official and parallel rates reflects improving market stability, with the official rate now trading at a ₦35.50 premium, or 2.23%, over the parallel market.

The recovery is being largely attributed to healthy foreign exchange inflows and robust external reserves. Last week, total FX inflows into Nigeria reached $550.90 million, driven primarily by foreign portfolio investments (FPIs) which accounted for over 55% of the total. Oil exporters, non-bank corporates, and other corporate entities also contributed to the inflows, while foreign direct investments and CBN interventions helped maintain market liquidity.

Market analysts are optimistic but cautious. AIICO Capital highlighted that ample dollar liquidity from FPIs and exporters underpinned the naira’s stronger performance. Similarly, Cowry Asset Management emphasized that while the currency’s appreciation is supported by steady inflows and rising reserves, speculative trading could still trigger short-term volatility. Experts suggest that the naira will likely trade within a narrow band in the coming weeks, with stability dependent on sustained inflows and prudent policy interventions.

Nigeria’s gross external reserves rose to $41.69 billion last week, reinforcing investor confidence and supporting the CBN’s efforts to stabilize the currency. While the naira’s return below ₦1,500/$ signals renewed market optimism, analysts caution that long-term resilience will require structural reforms, diversified FX sources, and policies that attract sustainable foreign direct investments. For now, traders and investors are watching closely to see if this momentum can be maintained into the year-end period.

source: punch