MARKET NEWS

written by Bamidele Ogunwusi 

After years of exchange rate instability and restricted access to foreign exchange (forex), Nigeria is witnessing a remarkable turnaround under the reform-focused leadership of Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso. 

A combination of tough but necessary economic policies, renewed monetary discipline, and strategic reforms in the foreign exchange market has led to significant gains — from increased reserves to improved liquidity, and a return of confidence among investors and financial institutions. 

This renewed confidence has also paved the way for long-awaited developments such as the restoration of international transactions using naira-denominated debit cards, a feat that remained elusive during the liquidity crunch of recent years. 

The key driver of this transformation lies in the CBN’s deliberate and coordinated approach to correcting years of policy distortions, eliminating multiple exchange rates, tackling arbitrage, attracting foreign capital, and creating an open and investor-friendly forex market. 

A new chapter in economic reform 

In 2023, with President Bola Tinubu assuming office and appointing Olayemi Cardoso as CBN Governor, Nigeria ushered in a bold new era in economic policymaking. 

Together, both leaders initiated some of the most far-reaching reforms in over a decade — including liberalising the foreign exchange market, ending costly central bank deficit financing, and discontinuing the opaque and burdensome fuel subsidy regime. 

The reforms were not limited to forex alone. The government also prioritised revenue generation, macroeconomic coordination, and inflation control. 

At the same time, the CBN focused on rebuilding external buffers, clearing forex backlogs, stabilising the exchange rate, and re-establishing investor confidence. 

These reforms are now yielding visible results. Gross external reserves rose from $33.22 billion in December 2023 to over $40.19 billion by mid-2025, while net foreign exchange reserves (which exclude obligations like swaps) surged from just $3.99 billion to $23.11 billion — the highest in over three years. 

International transactions with Naira cards resume 

In a development widely hailed as a symbol of restored stability and confidence in the financial system, Nigerian banks have lifted the ban on the use of naira debit cards for international transactions — a policy reversal that underscores the rebound in dollar liquidity. 

Tier-1 banks like United Bank for Africa (UBA), FirstBank, and GTBank, along with mid-tier lender Wema Bank, have now reactivated international spending on naira cards, after over three years of restrictions due to dollar shortages. 

UBA’s statement to customers announced that its premium naira cards — including Gold, Platinum, and World variants — could now be used for global transactions across online platforms, POS terminals, and ATMs. Wema Bank followed with a message that its naira Mastercard now “went global,” enabling customers to transact in dollars on international platforms like Amazon, Netflix, and YouTube. 

Similarly, FirstBank reintroduced a $500 monthly spending cap for international transactions, while GTBank pegged quarterly transaction limits at $1,000 online and $500 at ATMs. 

These changes mark a return to normalcy and reflect improved dollar supply in the system — driven by greater market participation, stronger foreign capital inflows, and CBN’s opening of new channels for diaspora remittances and other inflows. 

FX reforms fuel inflows, stabilise Naira 

According to data compiled from industry sources, Nigeria’s forex inflows rose to $5.96 billion in May 2025 — a 62% month-on-month increase and one of the highest monthly figures in recent years. 

Analysts at Financial Derivatives Company attributed this rise to rebounding oil prices and diversified inflow channels introduced by the CBN. 

Indeed, under Cardoso, the CBN has aggressively pursued reforms aimed at deepening forex access and ensuring price transparency. These include granting new licenses to International Money Transfer Operators (IMTOs), encouraging diaspora remittance inflows through better naira liquidity access, and implementing the willing-buyer, willing-seller forex model. 

These steps have made it easier for manufacturers, SMEs, and end-users to access forex via official channels, thereby reducing reliance on the parallel market and dampening speculative pressures on the naira. 

According to Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, the moderating premium between the official and parallel market exchange rates and the resulting drop in arbitrage were key enablers for banks’ decisions to reactivate their naira cards for global transactions. 

A stronger reserve position 

At the heart of the ongoing reforms is the steady rebuilding of Nigeria’s reserve buffers. In his remarks, CBN Governor Cardoso emphasised that the turnaround in reserves was the result of “deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability.” 

According to CBN figures, net forex reserves now stand at $23.11 billion — compared to just $3.99 billion a year earlier — while gross reserves reached $40.19 billion by mid-2025. 

This growth was largely due to the CBN’s reduction of short-term forex liabilities such as swaps and forwards, along with improved foreign capital inflows. 

The reserves’ expansion has also been aided by increased oil production and stronger non-oil forex inflows, helping Nigeria to build resilience against external shocks and reduce volatility in the currency market. 

As the CBN moves forward, it has committed to prudent reserve management, transparency in forex reporting, and maintaining policies that support exchange rate stability and investment inflows. 

Clearing the backlog, restoring trust 

One of the biggest burdens facing the new CBN team upon assumption of office in late 2023 was a staggering $7 billion in forex obligations to airlines, manufacturers, and other stakeholders — commitments that had been delayed due to illiquidity and policy inconsistencies. 

By unifying the forex market and adopting market-based mechanisms, the CBN has now cleared a significant portion of that backlog, restoring credibility to the financial system and confidence among both local and foreign investors. 

“The unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future,” Cardoso explained. 

To enhance the efficiency of the forex market, the apex bank is also introducing an electronic forex matching system — similar to those used in developed markets — that will allow better price discovery, transparency, and transaction flow. 

Broader economic implications and outlook 

The International Monetary Fund (IMF) has acknowledged the progress made so far but notes that Nigeria still faces critical structural and social challenges. 

According to Axel Schimmelpfennig, the IMF’s Mission Chief to Nigeria, sustained economic reform is crucial to lifting millions out of poverty and ensuring long-term development. 

“This does not happen overnight,” he said. “Making growth more inclusive also requires scaling up the existing cash transfer system and ensuring effective budgeting, transparent implementation, and strong accountability.” 

His colleague, Christian Ebeke, the IMF’s Resident Representative in Nigeria, added that improving domestic revenue mobilization is critical, especially in sectors like infrastructure, energy, agriculture, and climate adaptation. 

“The government’s tax reforms will make it easier to pay taxes and ensure that everyone who owes taxes pays them,” Ebeke said. 

Maintaining momentum 

The gains from the ongoing reforms are fragile and require sustained effort. For analysts and stakeholders, the key to continued progress lies in effective collaboration between monetary and fiscal authorities, stronger institutional coordination, and a commitment to discipline. 

Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), praised the CBN’s creative approach to forex market management and emphasised the importance of maintaining focus. 

“The policy shifts show the level of creativity, discipline, and hard work Cardoso has brought to the CBN. The reforms must continue if Nigeria is to achieve a sustainable, stable forex market,” he said. 

With diaspora remittances already contributing over $23 billion annually, and the CBN enabling more structured inflow mechanisms, experts say Nigeria is well-positioned to diversify its forex sources, reduce its reliance on oil, and fortify its economic buffers. 

A new era of stability 

After years of uncertainty, Nigeria is gradually returning to a path of macroeconomic stability and investor confidence. 

The positive turnaround in forex inflows, reserve accretion, and naira card functionality underscore the success of reforms championed by Governor Olayemi Cardoso and supported by broader government efforts. 

While challenges remain — including inflation, revenue shortfalls, and external risks — analysts agree that Nigeria is now better equipped to weather shocks and unlock its vast economic potential. 

The journey is far from over, but the foundation has been laid. The task now is to stay the course, ensure consistent implementation, and build on the momentum to create a more resilient and inclusive Nigerian economy.