Naira Edges Lower Against Dollar Despite Surge in Nigeria’s Foreign Reserves

Nigeria’s currency recorded a marginal decline on Thursday, even as the country’s foreign reserves climbed to levels not seen in nearly two decades, underscoring the persistent tension between macroeconomic recovery signals and sustained demand pressures in the foreign exchange market.

Data from the Central Bank of Nigeria (CBN) showed that the naira weakened by 0.11 percent at the Nigerian Foreign Exchange Market (NFEM), closing at ₦1,358.75 per dollar, compared to ₦1,357.27 recorded in the previous trading session. The movement reflects continued volatility in a market still adjusting to recent policy reforms and shifting liquidity conditions.

During intraday trading, the currency fluctuated between ₦1,356.75 and ₦1,361.50 per dollar, while total turnover at the official window fell to $128.12 million across 121 transactions, down from $133.73 million in the previous session. Market participants attributed the decline in turnover to uneven foreign exchange inflows and ongoing demand pressures from importers and offshore obligations.

In contrast, the parallel market recorded a mild appreciation, with the naira strengthening to around ₦1,370 per dollar, highlighting the persistent divergence between official and informal exchange channels despite recent efforts by the monetary authorities to unify pricing structures.

The currency movements come against the backdrop of a notable improvement in Nigeria’s external reserves, which are now approaching the $50 billion mark—levels last seen nearly 17 years ago. Analysts say the rebound reflects stronger oil earnings, improved capital inflows, and reduced foreign exchange liabilities.

Recent data also indicate that Nigeria’s net foreign exchange reserves rose to $34.8 billion at the end of 2025, surpassing pre-reform levels recorded before the Central Bank’s sweeping FX policy adjustments. Market analysts project further growth toward $40 billion in net reserves if current inflow trends are sustained.

The Central Bank has linked the improvement to ongoing policy reforms aimed at stabilising the foreign exchange market, including a reduction in forward and swap obligations that previously exerted pressure on external reserves. These adjustments have helped improve transparency and strengthened investor confidence in the FX framework.

However, economists caution that reserve accumulation has yet to fully translate into sustained currency stability, as underlying structural pressures—including import demand and external debt servicing—continue to weigh on the naira’s performance.

Global oil price movements also added another layer of complexity to Nigeria’s economic outlook. Brent crude fell by more than 3 percent to $94.78 per barrel, while West Texas Intermediate declined by 3.5 percent to $92.64, following reports suggesting reduced geopolitical tensions involving Iran.

The easing of supply disruption fears contributed to the decline in crude prices, a development closely watched in Nigeria given its heavy reliance on oil exports as the primary source of foreign exchange earnings and fiscal revenue.

Analysts note that while higher reserves provide a buffer for the economy, sustained currency stability will depend heavily on crude oil performance, capital inflows, and the Central Bank’s ability to maintain consistent foreign exchange policy direction.

The latest figures highlight a dual reality for Africa’s largest economy: strengthening external buffers on one hand, and continued exchange rate pressure on the other, as market forces adjust to ongoing reforms and global economic shifts.

For now, the naira’s trajectory remains closely tied to both domestic policy execution and external commodity dynamics, leaving investors watching closely for clearer signs of long-term stability in the months ahead.