MARKET NEWS

The naira strengthened further on Tuesday across foreign-exchange markets, supported by rising external reserves that climbed to their highest level in nearly eight years on the back of improved FX inflows and ongoing market reforms.

Nigeria’s external reserves rose to $47.02 billion as of February 6, 2026, according to data published by the Central Bank of Nigeria (CBN). The last time reserves stood at a similar level was August 2, 2018, when the stock of foreign currency assets reached $47.06 billion.

In its 2026 macroeconomic outlook, the apex bank projected that external reserves will increase to $51.04 billion this year, driven by stronger oil earnings, continued reforms in the foreign-exchange market, and improved external inflows.

CBN data showed that the naira appreciated by 0.2 percent at the Nigerian Foreign Exchange Market (NFEM) on Tuesday, with the dollar quoted at N1,351.02, compared with N1,354.26 on Monday.

The currency also strengthened in the parallel market, commonly referred to as the black market, gaining N5 against the dollar. The exchange rate closed at N1,440 on Tuesday, compared with N1,445 on Monday.

Nigeria’s FX market has started the year on a firmer footing, extending the positive momentum recorded in 2025, when the naira appreciated by about 7.4 percent year-on-year to N1,429 per dollar.

According to analysts at Quest Merchant Bank, the currency’s performance has been supported by the CBN’s consistent reform agenda aimed at enhancing market stability, alongside improved FX liquidity. In January, the naira strengthened further to N1,391 per dollar from N1,429 in December.

A key driver of the naira’s solid performance during the month was robust FX liquidity, underpinned by portfolio inflows. In addition, stronger trade receipts, reflecting the impact of elevated global oil prices helped boost FX supply and support currency stability.

Improved FX liquidity was reflected in Nigeria’s external reserves, which rose by $778 million month-on-month to $46.3 billion in January.

Beyond supply-side improvements, demand for the US dollar remained relatively muted, as corporates and importers have yet to fully scale up FX requests for trade-related imports, a trend typically observed at the start of the year.

The combination of strong FX inflows and relatively softer demand helped ease pressure on the naira, contributing to more stable market conditions during the period. This stability was evident in the sharp decline in volatility, with the average exchange rate appreciating to N1,416.5 per dollar from N1,452 in December.

Quest Merchant Bank also noted that external factors have supported the naira, as the US dollar began the year on a weaker footing, extending its previous-year softness amid policy uncertainty, rising trade tensions and concerns over the independence of the US Federal Reserve.

Despite the naira’s gains at the official window, the Quest report noted that the currency weakened in the parallel market during the month, depreciating by 0.5 percent month-on-month to N1,475 per dollar. The renewed widening of the gap between official and parallel-market rates reflects lingering structural distortions, which analysts warn could undermine the CBN’s price-discovery mechanism and create arbitrage opportunities for speculative activity.

“We expect the naira to remain broadly stable and trade within a narrow band, supported by sustained FX liquidity,” analysts at Quest Merchant Bank said. “We also anticipate improved liquidity driven by stronger offshore inflows, supported by a still-attractive carry trade environment and higher FX receipts from elevated oil prices.”

Separately, the Nigerian Economic Summit Group projects that the naira will trade at around N1,480 to the dollar in 2026, alongside a steady rise in external reserves to about $52 billion, as Nigeria consolidates recent macroeconomic reforms and stabilisation efforts.