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oming on the heels of the recent announcement by the Financial Action Task Force (FATF) that it has removed Nigeria from its dirty-money”Grey” list, the resurgence of the naira coupled with the sustained accretion of the external reserves has further strengthened optimism in Nigeria’s economy, writes Tony Chukwunyem 

According to the Central Bank of Nigeria’s (CBN) “Business Expectations Survey (BES)” report for September 2025, released last month, the general view among firms that took part in the research was that the current optimism in the economy is likely to continue into the first quarter of next year.

The report stated: “The Confidence Index (CI)- an indicator of aggregate business sentiment- stood at 31.5 index points in the current month, reflecting the optimism of respondents regarding the macroeconomy. This optimism is projected to persist over the next six months, peaking at 51.8 index points.

“All the sectors expressed optimism on the business outlook of the macroeconomy in the current month(September 2025). The services sector was leading at 32.5 index points. The optimism is expected to continue into the next six months, with the confidence index of Agriculture sector recording increased levels of optimism across different time periods.”

Similarly, at the 2025 International Monetary Fund (IMF)/World Bank Annual Meetings held in Washington DC, last month, the verdict of the Bretton Woods institutions was that Nigeria’s economy remained strong in the face of global headwinds from trade tariffs, slump in oil prices, and prolonged financial markets uncertainty.

IMF support

Indeed, the IMF, in its World Economic Outlook (WEO) report for October 2025, released at the event, projected positive growth of 3.9 per cent and 4.1 per cent for Nigeria in 2025 and 2026 respectively. Commenting on the report, the IMF’s Economic Counsellor, Pierre-Olivier Gourinchas, said the Fund based its outlook for Nigeria on several improving macroeconomic indicators and supportive domestic factors.

He disclosed that factors responsible for the higher growth revision include the exchange rate stability, rising foreign reserves, improved oil production, rising investor confidence and a supportive fiscal stance.

“Whereas growth in Nigeria is revised upward on account of supportive domestic factors, including higher oil production, improved investor confidence, a supportive fiscal stance in 2026, and given its limited exposure to higher US tariffs, many other economies see significant downward revisions because of the changing international trade and official aid landscape,” he said.

Speaking during the Intergovernmental Group of Twenty-Four (G-24) press briefing at the meetings CBN Governor, Olayemi Cardoso, stated that the deceleration in Nigeria’s inflation rate, naira stability, rising foreign reserves, among other positive economic indicators cited by the IMF were products of the apex bank’s reform measures, stressing that the country’s economy has been fully restructured, with huge buffers against global risks.

Responding to a question on the impact of the global tariff uncertainty on the domestic economy, Cardoso said the CBN’s measures had adequately protected the country from the turmoil.

He said: “I think we were very fortunate, because a lot of the things that were needed to have been done, we did them much earlier, and as a result of that, we’re able to create resilience and buffers against potential shocks. “And for us again, oil is basically the only commodity that was so exposed to the tariffs, and the impact of that was relatively modest.

We now have a more competitive currency with the results that, for once, we have a situation where we have a positive balance of trade surplus, and we expect it to be six per cent in GDP for some time. “So basically, what is happening is a complete restructuring of the economy, where we are encouraging people to go into domestic production, and, of course, discouraging imports.”

“So, and of course, in terms of anchoring expectations, we found that those who followed the Nigerian economy were fairly comfortable. And for us, again, oil is basically the only commodity that was so exposed, and the impact of that was relatively modest,” he added.

FX reserves accretion

Furthermore, speaking at the Nigeria Investors Forum, held on the sidelines of the annual meetings, CBN Deputy Governor in charge of Economic Policy, Dr. Mohammed Abdullahi, revealed that the country’s foreign exchange (FX) reserves had climbed to a five-year high of $43.4 billion.

He said the reserves, which hit the mark on October 10, provide 11 months of import cover. Abdullahi said: “Our gross reserves are at a five-year high of $43.4 billion as of October 10, enough to cover 11 months of imports. This growth comes after clearing FX backlogs and improving liquidity across the market.”

He noted that the naira had remained stable, with the exchange rate premium between official and parallel markets narrowing to less than 3 percent, compared to over 50 percent in 2022.

He also noted that inflation had fallen to 18.02 percent in September, its lowest level in three years, while capital inflows and remittances have strengthened Nigeria’s balance of payments. In his remarks at the event, Cardoso said the increase in foreign reserves signaled renewed investor confidence

This means that although increased FX inflow supports external reserves accretion, this may not be adequate to ensure naira stability if there is a significant spike in imports

and the positive impact of ongoing economic reforms. Cardoso said the rise in external reserves reflects the cumulative effect of fiscal and monetary coordination, improved FX flows, and renewed trust in Nigeria’s policy direction.

Significantly, in line with Cardoso’s assertions at the IMF/World Bank meetings, the naira and the country’s foreign exchange reserves have both maintained an upward trajectory in recent weeks.

Naira appreciation

For instance, the naira, which since the beginning of the year, had traded at between N1,460 and N1,500 per dollar, rebounded to below N1,458/$1 on the Nigerian Foreign Exchange Market (NFEM) penultimate week and had been rising steadily since then.

Thus, according to data released by the CBN, the local currency, last Friday, rose to N1421.73/$1 on the Nigerian Foreign Exchange Market (NFEM) from N1436.97/$1 the previous day. Although it weakened to N1,490 per dollar on the parallel market, from N1,470 per dollar last Thursday, forex traders said they expected the naira to continue to be stable at the segment of the market.

They attributed the local currency’s resurgence to factors such as the surge in foreign portfolio inflows, improved forex supply, occasioned by improved oil output and subdued demand for forex. Interestingly, in a statement he released in May this year, the CEO of CFG Advisory, Tilewa Adebajo, had contended that the naira should be trading below N1,000 per dollar based on economic fundamentals at the time.

According to him, a deeper and more transparent foreign exchange (FX) market, improved external reserves, and increased oil production supported a stronger naira.

He noted that the spread between the parallel and official FX markets had narrowed significantly, from over 50 percent in 2022 to under five per cent in 2025, as a result of the implementation of a Bloomberg-driven bid and offer platform that had enhanced transparency and price discovery.

Commenting on the likely positive impact of the naira’s appreciation on the economy, analysts at FBNQuest Research, in a recent report, predicted that the local currency’s strengthening could potentially reduce Nigeria’s external debt exposure and ease pressure on the country’s external reserves.

They pointed out that while the Federal Government has primarily relied on the domestic debt market to address its funding gap, “the relative stability of the exchange rate compared with the previous year has helped ease the pressure that external debt obligations typically exert on fiscal space.”

“Despite the Month-on-Month (MoM) increase in external debt obligations, Nigeria’s external reserves have continued to rise steadily, supported by FX accretion from multiple sources,” the analysts said.

FX reserves accretion

Noting that CBN data shows that the external reserves increased by approximately $1.1 billion MoM to $42.4 billion as at the end of September 2025, and that year-to-date, the reserves have gained $1.5 billion, the analysts attributed the dollar buffers strong recovery to, “a combination of improved FX earnings from crude oil, increased diaspora remittances and sustained foreign capital inflows.”

They also noted that while industry watchers anticipate a likely rise in external debt service payments which will be, “driven by heightened borrowing activity in the third quarter of the year,” they do not expect a slowdown in the growth momentum of Nigeria’s external reserves.

“Notably, the recent appreciation of the naira, driven by improved FX liquidity and reduced FX demand, could potentially limit Nigeria’s external debt exposure and ease pressure on the nation’s external reserves,” the analysts stated.

In fact, in a report released late August, analysts at Cowry Asset Management Limited had predicted that if global risks conditions remained supportive and Foreign Exchange (FX) inflows were not significantly disrupted, Nigeria’s gross external reserves may rise to $45 billion by the end of this year.

Despite the foregoing, a new report released by analysts at FBNQuest Research indicates that a decline in import activity, which has led to a muted demand for forex, also accounts for the rising naira and external reserves. This means that although increased FX inflow supports external reserves accretion, this may not be adequate to ensure naira stability if there is a significant spike in imports.

Conclusion

Thus, while the rising naira and external reserves may be positive news for the Nigerian economy at the present time, industry stakeholders stress that for the country to achieve sustainable economic growth, it must reduce its high dependency on imports.