Market News

By Michael Nwadike

The ongoing implementation of the fourth edition of the Foreign Exchange Manual by the Central Bank of Nigeria (CBN) since June 1, has strengthened the naira and triggered foreign reserves growth. The naira appreciation was supported by improved liquidity in the Nigerian Foreign Exchange Market (NFEM) window, alongside growing external reserves that have continued to bolster confidence in the market. The naira appreciated by N5.74 at the official market, closing at N1,361.05 to dollar. The gross external reserves climbed to a record $50.04 billion, reinforcing investor confidence and boosting the CBN’s capacity to support the local currency.

The new manual is also expected to deepen FX transparency, improve liquidity and strengthen market confidence and liquidity, beside aligning with the CBN’s broader vision of ensuring that businesses and individual have equal access to FX in a transparent and liquid market.

This development signifies improving transparency, consistency, and efficiency in the country’s FX market.

In the parallel market, commonly referred to as the black market, the naira remained unchanged at N1,385 per dollar. As a result, the gap between the official and parallel market exchange rates widened to N24 per dollar from N19 recorded 24 hours earlier. In real terms, Nigeria’s external reserves, which provide the CBN with the capacity to support the local currency and meet external obligations, have continued to rise steadily. Data published on the apex bank’s website showed that reserves increased to $49.80 billion as of June 1, 2026, from $48.32 billion recorded on May 7. The gross external reserves have further climbed to a record $50.04 billion, reinforcing investor confidence and boosting the CBN’s capacity to support the local currency.

Under the new guidelines, Authorised Dealers are permitted to engage in spot foreign exchange transactions among themselves, with customers, and with the CBN in any acceptable foreign currency for delivery within a maximum of two business days (T+2). The manual stipulates that all interbank spot transactions must be executed through an electronic trading system approved by the CBN.

The apex bank further directed Authorised Dealer banks to maintain adequate credit, settlement, and risk limits for all counterparties participating on the approved trading platform. Banks are required to strictly comply with Net Open Position (NOP) limits and ensure that no breaches occur at the close of any trading session. Further, the manual allows Authorised Dealer banks to conduct spot foreign exchange transactions with non-resident customers and clients in any acceptable foreign currency, provided settlement is completed.

The new manual, is expected to serve as a fresh regulatory guide for banks, importers, exporters, government agencies, and other participants in the foreign exchange market. For decades, Nigeria’s foreign exchange market has remained one of the most sensitive parts of the country’s economy. Any movement in the value of the naira directly affects prices of food, transport, school fees, medicines, fuel, manufacturing costs, and the general cost of living. Businesses depend heavily on foreign exchange to import raw materials and machinery, while investors closely study the stability of the market before bringing money into the country.

For ordinary Nigerians, the foreign exchange market may appear distant and technical, but its impact is felt daily through inflation, jobs, purchasing power, and overall economic confidence. It is against this critical background that the launch of this fourth edition has attracted widespread attention across the financial sector, banking industry, and business community.

In recent years, Nigeria has battled severe pressure on the naira, low foreign exchange liquidity, multiple exchange rates, speculative trading, and declining investor confidence.

These structural problems created deep uncertainty for businesses and contributed significantly to inflationary pressure across the country. For years, many manufacturers complained that they could not access foreign exchange to import raw materials, while airlines struggled to repatriate their earnings.

Foreign investors frequently delayed investments because they feared they would be unable to take out profits when necessary, and the country witnessed a wide gap between official and parallel market exchange rates at different periods. The launch of the new manual therefore represents much more than a routine regulatory update, reflecting the latest phase of a broader effort by the central bank to rebuild confidence in the Nigerian foreign exchange system after years of instability.

At the official launch, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, described the new manual as part of efforts to strengthen Nigeria’s macroeconomic foundation, improve transparency, and restore confidence in the foreign exchange market.

His remarks went beyond the unveiling of a policy document, reflecting the broader direction of the current foreign exchange reforms being pursued by the apex bank under the present administration. Cardoso made it clear that the foreign exchange market is not simply a platform for buying and selling dollars.

According to his policy philosophy, it plays a major role in determining price stability, investment confidence, and the smooth movement of goods and capital within an economy that is connected to global markets. He noted that foreign exchange is a critical enabler in any open economy because it anchors price stability, facilitates the flow of goods and capital, and shapes investor sentiment.

The Deputy Governor for Economic Policy, Mohammed Sani Abdullahi had earlier provided deeper technical details regarding the operational provisions of the manual. His contribution showed clearly that the revised manual is not merely an administrative document, but is a major component of the ongoing transformation of Nigeria’s foreign exchange market and wider financial system.

This demonstrates that the review was not an isolated exercise, but forms part of a broader restructuring of Nigeria’s monetary and exchange rate framework. The deputy governor said the central bank recognised the urgent need for a framework that reflects current realities, aligns with international standards, reduces inefficiencies, and supports a more transparent, rules-based, and market-oriented system. This facilitates clearer price discovery, which is the process through which market forces determine exchange rates based on demand and supply conditions.

Contributions of the Minister of Finance and Coordinating Minister of the Economy, the banking industry leadership, and major commercial bank executives further expanded the significance of the launch, showing a rare level of alignment between fiscal authorities, monetary regulators, and the banking sector.

Representing the Minister of Finance, the Permanent Secretary for Special Duties, Mohammed Sanusi Danjuma, described the manual as a major step in the country’s effort to strengthen its foreign exchange management system. His remarks reflected the position of the federal government that foreign exchange reform is not solely a monetary policy matter but a key part of Nigeria’s wider economic transformation agenda.

While these measures were introduced to correct long-standing economic distortions, they initially contributed to rising inflation and increased living costs, creating pressure on households and businesses. The finance ministry’s endorsement therefore signals strong, continued alignment on the reform agenda, with Danjuma noting that policy consistency and predictability are absolutely essential for investment and growth.

Offering a perspective from the commercial banking operators, Oliver Alawuba, the Chairman of the Body of Banks’ Chief Executives and Group Managing Director of United Bank for Africa, linked the revised manual to earlier initiatives such as the Electronic Foreign Exchange Matching System and the Nigerian Foreign Exchange Code, which are designed to modernise market governance.

Alawuba made a striking comparison between the current foreign exchange market and the situation two or three years ago, noting that in the past, bank customers constantly asked whether banks had foreign exchange available, whereas today the table has been turned to the point where banks now ask customers whether they have foreign exchange to sell. This reflects what banking executives see as a substantial improvement in liquidity and stronger confidence in formal market participation, shifting away from an era of severe scarcity where the central bank was the primary supplier through forced periodic interventions.

Nigeria recorded $10.37 billion in capital importation in the first quarter of 2026, marking an 83.8 per cent rise compared to the $5.64 billion achieved  in the corresponding period of 2025. This followed foreign investors ramped up purchases of money market instruments and bonds. Latest data released by the National Bureau of Statistics (NBS) showed that capital inflows also rose by 61 per cent quarter-on-quarter from $6.44 billion recorded in the fourth quarter of 2025, underscoring growing investor appetite for Nigerian financial assets.

Nwadike, a financial analyst, wrote from Lagos.