Market News

At $48.32b, external reserves cover 13 months imports

The naira, yesterday, gained more ground against the dollar at Nigeria‘s official forex market window.

The local currency closed at N1,355 to dollar at the official window stronger than N1,365 to dollar it closed on Monday.

This represents N10 gain with naira rebound attributed to increased demand for the local currency from both foreign and domestic players, as well as the Central Bank of Nigeria (CBN’s) ongoing interventions in the forex market.

The naira exchanges at N1,395 to a dollar at the parallel markets.

Trading volume in Nigeria’s official market has increased, signalling “active price discovery,” in which local companies and individual traders trade the naira’s fluctuations rather than merely hedging a crash.

Although the external reserves have come under pressure in recent weeks, at $48.32 billion on May 6, the reserves have the capacity to cover 13 months of imports for the economy.

The Nigerian foreign exchange market has become more responsive to daily policy signals instead of long-term speculation.

The second half of 2026 is projected to see a slight depreciation as pre-election spending (for 2027) boosts market liquidity.

The CBN had embarked on a series of bold reforms to attract more foreign capital to the economy and achieve price and exchange rate stability.

In 2023, the new administration and the CBN-led by its Governor, Olayemi Cardoso, liberalised the foreign exchange market, stopped central bank financing of the fiscal deficit, and reformed fuel subsidies. The government also strengthened revenue collection and took strategic steps to reduce the surging inflation rate.

Since these reforms were implemented, international reserves have increased, and anyone can now access foreign exchange in the official market.

Nigeria successfully returned to international capital markets last December and was recently upgraded by rating agencies. A new domestic, private refinery is positioning Nigeria up the value chain in a fully deregulated market.

CBN’s policies, including the currency reforms, led to investment inflows from abroad and reduced interventions in the domestic forex market.

The unification of exchange rates and the clearing of over $7 billion FX backlog raised the country’s investment outlook, with multilateral organisations, like the World Bank, describing it as a bold intervention to improve the economy’s sustainability in the long run.

Also, Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy. All these are deliberate efforts to woo investors and sustain capital inflows to the economy.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the  naira has remained relatively stable across the market for several months, ending years of volatility in the market.

Additionally, the Managing Director of Financial Derivatives Company (FDC), Bismarck Rewane,  posits that the local currency is undervalued when assessed using the purchasing power parity (PPP) model.

Rewane made the submission during his keynote address at the 2026 Economic Outlook organised by the Association of Corporate Treasurers of Nigeria (ACTN), where he anchored the session and offered a detailed analysis of the structural and cyclical factors influencing Nigeria’s exchange-rate movements.