Dollar Hoarders Count Losses as Naira Strengthens, External Reserves Climb to $48.5bn
- Nigeria's naira strengthens, forcing dollar hoarders to offload at a loss amid renewed market confidence
- Convergence between official and parallel FX markets reaches two-year high, improving liquidity and reducing arbitrage opportunities
- Nigeria's external reserves rise to $48.5 billion, boosting investor confidence and supporting currency stability
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
Nigeria’s currency rally is leaving dollar hoarders scrambling.
The naira extended its appreciation across both official and parallel foreign exchange markets this week, forcing many who bought dollars at elevated rates to offload at losses.
Source: Getty Images
After months of volatility that encouraged speculative demand, the recent strengthening of the local currency is reversing fortunes in the informal market.
A street trader who spoke to BusinessDay admitted that many operators who stocked up on dollars when rates spiked are now counting their losses.
According to him, several traders purchased the greenback at significantly higher levels and are now forced to sell below cost as rates retreat.
That shift reflects a cooling of speculative demand and renewed confidence in the naira.
Official and parallel markets show broad-based gains
At the close of trading for the week, the naira strengthened in both major segments of the FX market.
In the parallel market, commonly referred to as the black market, the currency closed at N1,340 per dollar.
This marked a notable improvement from N1,420 recorded the previous Friday, representing an N80 gain or nearly 6 per cent appreciation week-on-week.
Daily movements were also positive. The naira gained N5 from N1,345 quoted on Thursday, February 19, 2926. Over a five-day trading stretch, it strengthened by N40, rising from N1,380 on Monday.
At the official window, the Nigerian Foreign Exchange Market operated by the Central Bank of Nigeria, the currency appreciated by N9.10 week-on-week.
It moved from N1,355.42 the previous Friday to N1,346.32 at the close of trading.
On a day-on-day basis, however, the naira slipped slightly, weakening by N4.97 from N1,341.35 on Thursday to N1,346.32 on Friday.
Despite that minor dip, the broader trend for the week remained positive.
Convergence levels hit a two-year high
One of the most significant developments was the narrowing gap between the official and parallel markets.
By Thursday, the spread between both markets had narrowed to just 0.29 percent, its tightest convergence level in two years. Although the gap widened slightly to N6 by Friday, compared to N4 the previous day, the overall convergence signals improved price alignment and reduced arbitrage opportunities.
The black market rally had earlier pushed the naira to a three-year high of N1,345 per dollar before settling at N1,340 at week’s end.
This closer alignment between rates is widely seen as a positive indicator of improved liquidity and market coordination.
External reserves rise to $48.5 billion
Supporting the strengthening currency is a steady rise in Nigeria’s external reserves.
Data from the Central Bank of Nigeria show that reserves climbed to $48.50 billion as of February 17, 2026. The upward trajectory enhances the apex bank’s ability to intervene in the FX market when necessary.
Higher reserves typically bolster investor confidence, as they signal improved capacity to defend the currency and meet external obligations.
Market participants say the reserves buildup has contributed to easing pressure on the naira and calming speculative activity.
BDC reforms drive renewed optimism
Another major factor behind the recent appreciation is the policy shift allowing bureaux de change to re-enter the official FX market.
The apex bank recently restored access for licensed BDCs to purchase foreign exchange through authorised dealer banks at prevailing market rates. This move aims to improve retail dollar liquidity and reduce pressure in the informal segment.
Taiwo Ebenezer, South-West chairman of the Association of Bureaux De Change Operators of Nigeria, noted that the announcement alone boosted sentiment in the market.
However, BDCs have yet to commence actual dollar purchases from commercial banks, as operational modalities are still being finalized.
Under the new framework, 82 BDC operators were fully licensed to resume operations following regulatory reforms introduced last year.
Each bureau is permitted to purchase up to $150,000 weekly for eligible retail transactions.
Strict compliance measures accompany the reform. Banks must conduct comprehensive due diligence and know-your-customer checks before selling to BDCs.
Any foreign exchange purchased but not deployed must be resold within 24 hours, as operators are prohibited from holding open positions with funds sourced from the official window.
Cash transactions are capped at 25 percent of each deal, and third-party settlements are barred, reinforcing transparency and reducing speculative hoarding.
A turning point for Nigeria’s FX market?
The reintegration of BDCs marks a significant recalibration of Nigeria’s foreign exchange management strategy.
After years of restrictions and widening spreads between official and informal markets, policymakers appear focused on improving liquidity, enhancing price discovery, and rebuilding confidence.
Source: Getty Images
For now, the message to dollar hoarders is clear. The tide has turned.
As the naira firms up and reserves continue to rise, speculative demand is weakening.
Those who bet on persistent depreciation are finding themselves squeezed, while the broader market adjusts to a more stable and coordinated FX environment.
Naira starts new week on high as reserves surge
Legit.ng earlier reported that the naira opened the new trading week on a stronger footing, extending gains recorded at the close of last week as rising external reserves lifted confidence across Nigeria’s foreign exchange markets.
Data from the Central Bank of Nigeria showed the local currency appreciated by 1.5 per cent week on week at the Nigerian Foreign Exchange Market, reflecting sustained demand-supply balance improvements.
At the official market, the naira closed at N1,366.19 per dollar on Friday, February 6, 2026 up from N1,386.55 at the end of the previous week, which marked the final trading session of January 2026.
Source: Legit.ng
