Dollar Inflows, IMTOs Lift Naira to 10-Month High, Experts Warn of Hidden Economic Risk
- The Nigerian currency has witnessed sustained gains over the last week, driven by forex inflows and remittances
- Despite a slight dip on Friday, October 3, 2025, the local currency appreciated by 101 basis points (bps) at N1,450 per dollar
- However, experts have warned that the naira is overvalued by 30% and could lead to loss of competitiveness, resulting in an import bill of N6 trillion
Pascal Oparada, a reporter for Legit.ng, has over ten years of experience covering technology, energy, stocks, investment, and the economy.
The naira strengthened week-on-week, driven by improved dollar supply.
According to reports, the exchange rate’s positive move against the dollar last week was due to a softer US dollar following weaker-than-projected US economic data.
Source: Getty Images
IMTOs, investors drive the naira’s gain
According to data from two investment firms, Cordros Capital Limited and AIICO Capital, the naira’s official spot rate was shaped by International Money Transfer Operators (IMTOs).
Data from the Central Bank of Nigeria (CBN) showed that the foreign exchange market experienced a stronger dollar supply, resulting in an exchange rate of N1,475 per dollar.
The exchange rate was reportedly influenced by steady interventions and improved inflows, which anchored the market at N1,445 and N1,468, respectively.
The local currency rose slightly over sustained dollar supply and tempered demand, closing at N1,465.68 per dollar, rising by 101 basis points (bps) per week.
The naira gains as FX reserves rise
In the unofficial parallel market, the Nigerian currency rose by 1.48% to N1,488, showing the positive side spill over from improved liquidity conditions and growing external reserves.
Meanwhile, Nigeria’s external reserves recorded robust earnings, rising to a twelve-week high of $150 million to $42.41 billion as of early October, driven by inflows from oil, remittances and portfolio investments.
Experts warn against a stronger naira
A prior report by Legit.ng disclosed that the naira hit its strongest level in nearly 10 months, lifted by tighter monetary policy and rising foreign reserves.
However, a new report by investment bank Renaissance Capital (Rencap) warned that the currency may now be overvalued by as much as 30%, posing a significant risk to Nigeria’s economic competitiveness.
Nigeria’s import bill may jump
According to Rencap’s findings, this overvaluation could cost Nigeria up to ₦6 trillion in lost competitiveness and higher import bills by 2026, a situation analysts say could hurt local manufacturing and exports.
The report, based on a Real Effective Exchange Rate (REER) model, measures the naira’s strength against a basket of global currencies adjusted for inflation.
It arrives as the exchange rate stabilises between ₦1,400 and ₦1,450 per dollar, supported by strong foreign reserves now above $41 billion.
Expert praises the naira’s gain
“Market forces drive the current exchange rate and are purely organic,” Janet Ogochukwu, a senior banker and economist, told Legit.ng during a call.
She said that the external reserves accretion is inspiring confidence among investors.
“There is a lot of positive sentiment in the market now among investors regarding the economy. This is due to the external reserves gain”, she said.
Amid the naira rally, forex inflows and external reserves accretion are low oil prices.
Crude oil price dip poses economic risk
According to Market Forces Africa, Nigeria’s Bonny Light crude dipped by 4.66% to $69.94 per barrel, raising concerns over potential revenue loss for the Nigerian government and broader fiscal pressure if oil prices remain muted in the short to medium term.
Source: Getty Images
Reports say oil prices posted a weekly loss of 8.1% after OPEC announced output increases.
Brent crude futures for November delivery sold at $64.53 per barrel, down by $4.68.
WTI futures settled at $60.88, down $4.84%, representing 7.36%.
Naira strengthens to 7-month high
Legit.ng earlier reported that Nigeria’s currency, the naira, extended its rally against the US dollar last week, buoyed by robust foreign exchange inflows and renewed investor confidence.
The naira touched its strongest level in seven months, signalling fresh momentum in the Central Bank of Nigeria’s (CBN) reform-driven strategy to stabilise the forex market.
At the official window, the naira appreciated 0.07% to close at ₦1,475.34 per dollar, compared to ₦1,486 a day earlier.
Source: Legit.ng
