Market News

The naira on Thursday recorded a slight appreciation against the dollar in the official foreign exchange (FX) market, as Nigeria’s external reserves continued to maintain a steady upward trend.

At the close of trading yesterday, the naira strengthened by 0.3 percent, with the dollar quoted at N1,466.65 compared to N1,470.62 recorded on Wednesday at the Nigerian Foreign Exchange Market (NFEM), according to data published by the Central Bank of Nigeria (CBN).

The marginal gain reflects improved liquidity and sustained positive sentiment in the official window, driven by steady inflows and foreign exchange management measures implemented by the apex bank.

However, at the parallel market, popularly known as the black market, the local currency weakened slightly, losing 0.5 percent to close at N1,492 per dollar on Thursday, compared with N1,485 recorded on Wednesday. Traders attributed the decline to higher cash demand from retail end-users and importers, amid limited supply in the informal segment.

Nigeria’s external reserves have continued to build up, rising steadily to $42.57 billion as of October 7, 2025, according to the latest data from the CBN. The growth in reserves has been supported by improved oil earnings, diaspora remittances, and foreign portfolio inflows, reinforcing confidence in the foreign exchange market and contributing to the naira’s relative stability across trading segments.

The World Bank Group said the CBN has leveraged net positive inflows to build FX reserves. It stated this in the October 2025 edition of its Nigeria Development Update titled “From Policy to People: Bringing the Reform Gains Home”, released on Wednesday.

“The exchange rate has been market-reflective, and its previous adjustment continues to benefit the external position,” the World Bank said.

According to the report, the market remains heavily dependent on FX flows from Foreign Portfolio Investors (FPI) and the CBN. FPI has been attracted by high Open Market Operation (OMO) yields, and CBN has leveraged positive net FX inflows to build up reserves and maintain exchange rate stability. Yet, for the FX market to be sustainably liquid and market-driven, longer-term inflows, including from oil and remittances, need to increase. It is also critical to accelerate non-oil exports, which also depend on addressing supply-side constraints. In addition, with low incentives to hoard US dollars given the higher domestic yields and a more stable exchange rate, progressively allowing banks to hold larger FX net open positions within appropriate macroprudential limits and as part of a broader strategy to support FX market deepening and exchange rate flexibility would, as market confidence strengthens, help promote greater market-driven naira stability.

“Lastly, CBN’s exchange rate policy, including FX intervention policy, needs to be clarified and communicated to the market. A transparent FX strategy would help anchor expectations as to what CBN’s reserves target is and how it would intervene in case of large shocks, as in April 2025,” the report stated.