Naira Breaks New Ground, Gains 3.6% as Foreign Investors Move Dollars Into Nigeria
- Nigeria's naira appreciated 3.6% in January, marking its strongest monthly performance in nearly two years
- Foreign investors returned to the forex market as liquidity improved, bolstering the naira's value in both official and parallel markets
- Also, Nigeria's gross external reserves surpassed $46 billion, providing a critical buffer for currency stability amid ongoing reforms
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Nigeria’s naira has broken fresh ground, posting its strongest monthly performance in nearly two years as foreign investors ramped up dollar inflows into the economy.
In January 2025, the local currency appreciated by about 3.6 per cent against the U.S. dollar in the official foreign exchange market, buoyed by rising offshore inflows and muted demand for international payments.
Source: Getty Images
Market data show the naira gained roughly ₦35 per dollar week on week, closing at ₦1,386.55/$ in the official market.
It touched an intraweek low of ₦1,381/$, a level not seen in months, reinforcing growing optimism around the sustainability of recent currency reforms aimed at curbing arbitrage and speculative trading.
The parallel market also sees relief
The gains were not limited to the official window. In the parallel market, the naira strengthened by ₦25 to close at ₦1,460/$ at the end of last week’s trading.
Despite the improvement, the gap between the official and parallel rates widened slightly, with TrustBanc Financial Group noting that the FX spread increased to 5.30 per cent from 4.46 per cent the previous week.
Analysts say the widening spread reflects lingering structural frictions but does little to undermine the broader narrative of improving currency stability.
Foreign investors return as liquidity improves
Throughout January, stability largely prevailed in the FX market, with modest but steady appreciation driven by improved liquidity. Foreign portfolio investors, local market participants, and reduced Central Bank of Nigeria intervention collectively supported the naira’s rally.
Officially, the naira gained 3.55 per cent during the month, while the parallel market recorded a smaller but notable 0.68 per cent appreciation.
According to a report by Market Forces Africa, the improvement came amid a surge in Nigeria’s external reserves, which crossed the $46 billion mark, offering a stronger buffer for the economy.
External reserves cross the $46 billion mark
Nigeria’s gross external reserves rose by $687.4 million in just 30 days to $46.18 billion, underpinned by higher crude oil receipts, diaspora remittances, and improved non-oil FX inflows.
Analysts view the reserve buildup as a critical anchor for the currency, particularly at a time when global investors are closely watching Nigeria’s reform trajectory.
Market watchers say foreign portfolio investments have been flowing back into Nigerian assets as elevated yields on naira-denominated instruments remain attractive for offshore investors seeking higher returns.
Osas Igho, a financial analyst revealed on call with Legit.ng that Nigeria's external reserves positions gives the naira a competitive edge.
"Right now, the naira has a strong edge over the US dollar due Nigeria's strong reserves position. You know that the reserves is buffer and a firepower against the naira's depreciation when the chips are down," he said.
February outlook: Cautious optimism builds
Looking ahead, analysts expect the naira’s momentum to extend into February, albeit at a measured pace.
Cowry Asset Limited projects moderate gains supported by steady oil receipts, stronger non-oil inflows, and a favourable trade balance. Stable to mildly bullish oil prices and unchanged U.S. Federal Reserve rates are also expected to provide support.
Source: Getty Images
AIICO Capital Limited, however, cautions that some volatility may persist. Still, the firm expects the naira to remain broadly stable, with robust external reserves and ongoing fiscal and monetary reforms helping to limit downside risks in the near term.
“Robust external reserves and expectations of sustained high crude oil prices should provide support, alongside ongoing monetary and fiscal reforms aimed at boosting foreign inflows.
Downside risks from external shocks are expected to remain limited in the near term”, AIICO Capital added.
CBN updates Customs duty rates as Naira gains
Legit.ng earlier reported that The CBN has released a revised exchange rate for the clearance of imported goods at Nigeria’s air and seaports, following the sustained appreciation of the naira against the US dollar.
The update reflects recent gains by the local currency at the official foreign exchange market and is expected to ease cost pressures for importers.
The naira has enjoyed a bullish run in the closing weeks of January, ending the month at N1,386 per dollar, according to data from the Nigerian Foreign Exchange Market (NFEM).
Source: Legit.ng
