Naira Posts Best Run in a Decade as CBN Reforms Impact FX
- The naira appreciated by over 7% in 2025, marking its strongest annual performance in a decade
- External reserves improved to $45.60 billion, enhancing CBN's ability to stabilise the currency
- CBN's reforms transformed the FX market, significantly narrowing the gap between official and parallel rates
The naira delivered its strongest annual performance in more than 10 years in 2025, appreciating by over 7 per cent against the United States dollar as sweeping foreign exchange reforms by the Central Bank of Nigeria began to reshape market confidence.
Recent data from the apex bank showed that the local currency strengthened by 7.4%, or N105.61, to close at N1,435.75 per dollar on the final trading day of 2025, compared with N1,541.36 at the start of the year.
The gain marked a sharp turnaround from years of sustained pressure and volatility in the foreign exchange market.
Source: Getty Images
The positive momentum has continued into 2026. On Tuesday, January 6, the naira rose to an all-time high of N1,419.06 per dollar at the Nigerian Foreign Exchange Market, coinciding with the first anniversary of the Electronic Foreign Exchange Management System, EFEMS.
Fresh naira highs signal sustained recovery
According to CBN figures, the currency appreciated by 0.7 percent or N10.24 in a single session, improving from N1,429.30 quoted at the close of trading on Monday.
On a year-on-year basis, the naira strengthened by 8.07 percent, gaining N114.54 from N1,533.60 recorded on January 6, 2025.
This steady appreciation has reinforced the perception of a more stable and transparent FX market.
In the parallel market, commonly referred to as the black market, the naira traded flat at N1,490 per dollar, unchanged from the previous session, further underscoring reduced speculative pressure.
External reserves strengthen CBN firepower
Nigeria’s external reserves have also recorded a notable improvement, enhancing the central bank’s ability to intervene and smoothen volatility.
Data published on the CBN website showed that reserves climbed to $45.60 billion as of January 5, up from $40.88 billion at the beginning of the year.
The reserve build-up reflects improved foreign inflows and easing demand pressures, key factors supporting the naira’s recent gains.
Analysts say stronger reserves have helped restore confidence among investors and importers who rely heavily on access to foreign currency.
Cardoso: FX market has been transformed
According to a report by BusinessDay, CBN Governor Olayemi Cardoso said the foreign exchange market was largely paralysed when the current leadership took office, weighed down by a backlog of more than $7 billion in unmet FX obligations.
At the time, the wide gap between official and parallel market rates, which exceeded 60%, fuelled distortions and rent-seeking.
Cardoso described the recent turnaround as one of the clearest signs of renewed confidence in the economy.
He said the bank has sustained the unification of multiple exchange-rate windows while fully clearing the FX backlog, restoring credibility and enabling businesses to plan with greater certainty.
EFEMS and FX Code drive transparency
According to the CBN governor, the introduction of the Nigerian Foreign Exchange Code has set clear standards for transparency, ethics, governance and fair dealing among authorised dealers.
In addition, EFEMS, powered by Bloomberg BMatch, has transformed FX trading through mandatory order submission, real-time regulatory visibility and improved price discovery.
These measures have significantly reduced opacity and market manipulation, narrowing the gap between official and parallel rates to under 2 per cent from levels above 60% previously.
CBN data showed that the premium between the Nigerian Foreign Exchange Market and bureaux de change rates narrowed to about 2.11% as of December 9, 2025, compared with 5.92% in 2024.
A similar trend was recorded in November, when the premium declined to roughly 2.17%.
Outlook brightens as naira stability returns
The apex bank said ongoing reforms are expected to sustain exchange-rate stability, with external reserves projected to rise to about $51.04 billion in 2026 from an estimated $45.01 billion in 2025.
This outlook is supported by reduced FX pressures, higher oil earnings, sovereign bond issuance and increased diaspora remittances.
The CBN also highlighted the Dangote Refinery’s expansion to 700,000 barrels per day, with a medium-term target of 1.4 million barrels per day, as a key factor that could further reduce import dependence and support reserve accumulation.
Source: Getty Images
Muda Yusuf, Director and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, described exchange-rate stability as one of the most visible economic achievements of 2025.
He noted that the naira largely traded within the N1,440 to N1,500 range during the year, easing imported inflation pressures and restoring predictability to pricing, contracts and investment decisions.
CBN pumps $7.5 billion to keep naira afloat
Legit.ng earlier reported that the CBN spent about $7.53 billion intervening in the foreign exchange market in 2025, helping the naira close the year with a 7.14 per cent gain.
The scale of intervention underscored the monetary authority’s resolve to stabilise the currency amid volatile global conditions and heavy capital outflows earlier in the year.
At the official window, the naira settled at N1,435.75 to the dollar, outperforming earlier market expectations. Several analysts had projected a year-end rate around N1,450, with more pessimistic forecasts putting the currency near N1,500 without sustained support.
Proofreading by Kola Muhammed, copy editor at Legit.ng.
Source: Legit.ng
