The naira continued its positive momentum in the official foreign exchange market last week, appreciating by 0.72% (or ₦10.5) to close at ₦1,455.17 per dollar—its strongest level since December 2024, according to data from the Central Bank of Nigeria.
The local currency also gained ground at the parallel market, strengthening by 0.88% to close at ₦1,475 per dollar. The improved performance in both markets was largely attributed to increased foreign exchange inflows, especially from portfolio investors and remittances, which enhanced liquidity and eased pressure on the naira.
During the week, the FX market experienced mixed trading. It opened with some bearish activity due to early demand pressures caused by the exit of some foreign portfolio investors. However, by midweek, sentiment improved significantly, driven by stronger foreign inflows—particularly from investors sourcing naira for local fixed-income investments.
In the coming week, market analysts expect the naira to remain stable, supported by steady US dollar supply, stronger external reserves, and ongoing interventions by the Central Bank. While the outlook is largely positive, some caution remains. Rising import demand or weaker dollar inflows could moderate further gains in the currency.
Nigeria’s external reserves rose to $42.57 billion last week, supported by increased oil sales, remittance inflows, and portfolio investments. The growth in reserves enhances the Central Bank’s capacity to manage short-term pressures and maintain relative stability in the FX market.
Further strengthening investor sentiment was the recent inclusion of Nigeria on a global watchlist for potential reclassification to frontier market status. The global index provider’s semi-annual review noted that Nigeria now meets key market quality criteria, signaling improved FX liquidity and operational efficiency.
This development follows reforms that have eased previous concerns about delayed capital repatriation and FX access. Inclusion on the watchlist marks a formal observation period that could culminate in an upgrade during the next review cycle in March 2026.
Analysts say the move could attract significant capital inflows from global investment funds, particularly as active managers begin positioning ahead of a potential upgrade. This anticipated inflow of foreign capital is expected to further support the naira by boosting dollar supply in the market.
In the near term, the market is likely to benefit from investor optimism and potential price appreciation. However, long-term currency stability will depend on Nigeria’s commitment to maintaining a market-driven economy and sustaining policy reforms that enhance transparency and investor confidence.
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