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The naira depreciated against the dollar across foreign exchange (FX) market segments in October, despite rising external reserves and increased

The naira depreciated against the dollar across foreign exchange (FX) market segments in October, despite rising external reserves and increased market activity providing some support for the local currency. 

Data published by the Central Bank of Nigeria (CBN) show that the naira depreciated by N16.17 month-on-month, losing 1.2 percent as the dollar was quoted at N1,346.26 on Friday, compared with N1,330.09 at the beginning of October at the Nigerian Foreign Exchange Market (NFEM). 

On a weekly basis, the local currency weakened by N15.58, or 1.16 percent, from N1,330.68 quoted at the NFEM on Friday the previous week. Day-on-day, however, the naira appreciated marginally by 65 kobo from N1,346.91 on Thursday. 

In the parallel market, also known as the black market, the local currency depreciated by N25 month-on-month to N1,385 on Friday, representing a loss of 1.81 percent from N1,360 traded at the beginning of October 2026. 

On a weekly basis, the naira lost 0.5 percent, weakening from N1,378 quoted on Friday the previous week. The gap between the official and parallel market rates remained at N39 per dollar.

Market activity improved during the month under review, as turnover in the interbank segment of the FX market jumped by 77.97 percent to $5.25 billion in October from $2.95 billion recorded in September 2026. The number of deals also rose by 4.66 percent to 2,694 in October, compared with 2,574 in the previous month. 

Although NFEM figures for deals and turnover were not available for Friday, available data showed that total turnover at the window reached $16.64 billion in October, up from $12.98 billion in September. The number of deals, however, declined to 6,468 in October from 6,831 in September 2026. 

Nigeria’s external reserves, which provide the CBN with the capacity to support the naira and meet external obligations, maintained an upward trajectory, rising to $55.24 billion as of October 29, 2026. 

This represented a 28.02 percent increase from $43.15 billion recorded in the corresponding period of 2025, according to data published on the CBN website.

The rise in external reserves provides a stronger buffer against external shocks and supports the country’s capacity to meet foreign exchange obligations. However, the naira’s October performance shows that stronger reserves alone have not prevented renewed depreciation in the FX market.

World Bank links reserve growth to portfolio inflows 

The World Bank said Nigeria’s gross external reserves rose above $54 billion in September, supported largely by foreign portfolio inflows.

The bank also attributed part of Nigeria’s sharp decline in inflation between January and December 2025 to tight monetary policy and reduced exchange-rate volatility. 

According to the Global Bank’s report, headline inflation fell from 27.6 percent in January 2025 to 15.2 percent in December 2025, reflecting the impact of tighter monetary conditions and improved exchange-rate stability. 

The report further stated that gross federation revenues increased by 69 percent in real terms between 2023 and 2025, largely reflecting exchange-rate reforms, the removal of the petrol subsidy and stronger revenue administration. 

These findings highlight the role of exchange-rate reforms in strengthening government revenue and reducing inflationary pressures, while the growth in external reserves underscores the importance of foreign portfolio inflows in supporting Nigeria’s external position. 

Nigeria risks naira crisis if fuel subsidy returns, Oyedele warns 

Nigeria risks renewed pressure on the naira and capital flight if the government reverses its economic reforms to restore petrol subsidies, Finance Minister Taiwo Oyedele has warned, defending fuel price discounts offered by the Nigerian National Petroleum Company (NNPC) as a commercial strategy rather than a government-funded subsidy. 

Oyedele, speaking at a press briefing during the IMF-World Bank Annual Meetings in Bangkok, Thailand, said reversing the reforms could undermine investor confidence, trigger capital outflows and reverse gains made in stabilising the foreign exchange market.

He warned that even the suggestion that the government was considering a return to fuel subsidies could unsettle investors, prompt Nigerians to move their savings into foreign currencies and place additional pressure on the naira. 

“Even Nigerians, the elites, the middle class, the high net worth, will move away from Naira. They will start buying dollars,” he said. 

Oyedele added that capital outflows, combined with rising domestic demand for foreign currencies, could create a damaging cycle of instability in the foreign exchange market. 

“They start moving against Naira. So capital is exiting, Nigerians are moving against the Naira. This is the perfect combination for the storm, for the devastating impact,” he said. 

The minister also rejected suggestions that fuel price discounts offered through NNPC Retail amounted to a return to subsidies, arguing that the arrangement reflected normal commercial practices in which businesses reduce their profit margins to attract customers and increase sales. 

“I do not know which part of the world you live in. It’s called retail marketing,” he said, explaining that businesses routinely offer discounts to boost sales and build customer loyalty. 

“When they say buy one, get one free, that’s commercial. If they say take 10 percent off, that’s commercial,” he added. 

According to Oyedele, NNPC Retail could increase sales volumes by offering more competitive prices, potentially recovering some of its reduced margins through higher sales over time. 

His comments come as the Federal Government seeks to defend its economic reforms amid persistent pressure over the cost of living and questions about whether the policies will be sustained ahead of the 2027 general elections. 

The removal of petrol subsidies in 2023 and the liberalisation of the foreign exchange market have formed key pillars of the government’s reform programme, which officials say is intended to improve fiscal sustainability, strengthen market confidence and establish a more stable macroeconomic environment.

However, the reforms have also increased pressure on households and businesses through higher fuel and transportation costs, fuelling calls for additional government intervention to cushion the impact.

Oyedele said concerns about a possible reversal of the reforms had featured repeatedly in his engagements with investors during the annual meetings, with international investors seeking assurances that Nigeria would maintain its policy direction. 

He argued that restoring petrol subsidies could jeopardise progress in stabilising the economy, particularly if investors interpreted such a move as a retreat from the government’s commitment to fiscal discipline and market-based pricing. 

A renewed loss of confidence, he warned, could encourage investors to withdraw capital while prompting domestic savers to seek protection against possible naira depreciation by buying dollars, increasing pressure on the foreign exchange market. 

Conversely, he said sustained reforms could help lower inflation, reduce borrowing costs and support stronger economic growth by creating a more predictable environment for investment and business expansion.