Dollar Stumbles to Four-Year Low as Naira Opens New Month With a Surprise Surge
- The naira has strengthened significantly against the dollar, reaching N1,386.55 this week
- Positive trends in both official and parallel markets signal improving FX stability
- Increased foreign investment and oil inflows support the naira's growth outlook for 2026
The naira has kicked off the new month with renewed momentum, riding on a sharp decline in the value of the US dollar across Nigeria’s foreign exchange markets.
At the close of the five-day trading week, the local currency recorded its strongest performance in nearly two years, reinforcing growing optimism around the stability of the FX market.
Source: Getty Images
At the official Nigerian Foreign Exchange Market (NFEM), the dollar fell to N1,386.55 on Friday.
This marked a gain of N35.08 for the naira, or 2.53 per cent, compared with the N1,421.63 recorded at the end of the previous week.
Strong weekly and daily gains at the official window
Trading data from the Central Bank of Nigeria showed that the naira opened the week at N1,418.95 per dollar before strengthening steadily to close at N1,386.55. This represents a weekly appreciation of N32.40, or 2.34 per cent.
On a day-on-day basis, the currency gained further ground on Friday, appreciating by N10.44 or 0.75 per cent from Thursday’s close of N1,396.99.
The consistent upward movement highlights improving confidence and liquidity in the official FX window.
Parallel market also sees relief
The positive trend was not limited to the official market. At the parallel market, commonly referred to as the black market, the naira appreciated by N18 to close the week at N1,452 per dollar on Friday.
This represents a 1.23 per cent gain from the N1,470 level seen earlier in the week.
The narrowing gap between official and parallel market rates continues to signal reduced arbitrage opportunities and easing speculative pressure on the currency.
External reserves and FX reforms drive stability
Nigeria’s growing external reserves remain a key support factor. According to the CBN, gross external reserves climbed to $46.17 billion as of January 29, 2026, strengthening the central bank’s ability to defend the naira and manage volatility.
A report by Quest Merchant Bank noted that Nigeria’s FX market entered a more stable phase in 2025, driven by structural reforms, improved transparency, and tighter domestic financial conditions.
Key initiatives such as the settlement of legacy FX obligations and the launch of the Electronic Foreign Exchange Matching System have improved price discovery and market depth.
By 2025, price convergence across FX market segments had largely been restored, significantly reducing the wide disparities seen after FX liberalisation in mid-2023.
Capital inflows and global tailwinds boost naira
Improved market confidence translated into stronger FX inflows. Data from FMDQ show that average monthly FX inflows rose to $3.9 billion in 2025, up from $2.6 billion in 2024, largely driven by foreign portfolio investors attracted by high domestic yields.
Diaspora remittances, averaging around $5 billion per quarter, alongside oil-related inflows, also provided steady FX support.
Source: Getty Images
Meanwhile, global conditions played a role, as US Federal Reserve rate cuts in 2025 improved risk appetite and redirected capital flows toward higher-yielding emerging markets like Nigeria.
What to expect in 2026
Looking ahead, Quest Merchant Bank expects exchange rate conditions to remain broadly stable in 2026, though not without intermittent pressure.
Oil will continue to dominate FX earnings, accounting for nearly 88 per cent of merchandise inflows, leaving the naira exposed to global oil price swings.
Still, analysts believe sustained portfolio inflows, steady remittances, and continued policy discipline should help cushion the currency, keeping the naira on firmer ground despite external uncertainties.
CBN releases new exchange rate as naira recovers
Legit.ng earlier reported that the Nigerian naira strengthened against the US dollar at the official foreign exchange window on Tuesday, supported by strong dollar supply and muted international payment demands, according to a daily FX update from the Central Bank of Nigeria (CBN).
At the Nigerian Foreign Exchange Market (NFEM), the naira appreciated by 7 basis points, or 94 kobo, to close at N1,419.35 per dollar.
Trading data showed the currency exchanged within a narrow band of N1,421 to N1,418.40, reflecting steady liquidity conditions.
Source: Legit.ng
