Naira Strengthens to N1,497/$ as FX Inflows and Reserves Boost Market Confidence

The naira gained ground against the US dollar on Monday, breaking below the N1,500/$ barrier for the first time in over six months. The Central Bank of Nigeria (CBN) reported that the currency closed at N1,497.46/$ in the official market — an improvement from its previous closing rate of N1,501.49/$, reflecting a 0.27% appreciation.

This marks the first time since late February to early March 2025 that the naira has traded below N1,500 in official markets. The gain follows a week of consistent testing of the threshold, where intra-day rates hovered just above that level.

Similar movement was observed in the parallel market, with the naira firming up by 0.33% to N1,535/$, according to CardinalStone Research.

On a weekly basis, the naira appreciated 0.98% in the official window, closing at N1,501.50/$, while the parallel market rate also improved slightly.

According to the Coronation Weekly Update, the official exchange rate ended the week at a ₦35.50 premium (2.23%) over the black market rate, indicating a narrowing gap between both markets.

Foreign Inflows Drive Market Sentiment

The update revealed that Nigeria attracted $550.90 million in total foreign exchange inflows last week — only slightly below the $567.20 million recorded the week before.

The breakdown of inflows shows:

Foreign Portfolio Investors (FPIs) led with $303.8 million (55.15%)

Exporters contributed 17.61%

Non-bank corporates added 17.57%

Other corporates made up 4.32%

Foreign Direct Investment (FDI) accounted for 3.39%

CBN provided 2.36%

Individuals added the remaining 0.60%

Analysts agree that the naira’s performance is being underpinned by:

Strong FPI inflows

Rising external reserves

Continued monetary policy support from the CBN

CBN’s Intervention, Oil Dollar Flows Support Stability

AIICO Capital noted that robust dollar inflows from oil exports and foreign investment contributed to a generally offered tone in the FX market last week.

“The naira’s stability is being reinforced by the CBN’s proactive policy stance and steady liquidity,” the firm stated.

Cowry Asset Management echoed this, attributing the naira’s resilience to central bank support, increased reserves, and a healthier supply of FX. However, they warned that speculative behavior could still pose short-term risks.

“As long as current trends continue, the naira may sustain its path of modest appreciation — but volatility risks remain if speculative demand returns.”

Reserves Continue Upward Climb

Nigeria’s gross external reserves reached $41.69 billion as of Friday last week, with consistent daily gains adding to market optimism. Analysts believe this upward trajectory will help anchor confidence and support the naira through upcoming economic pressures.

Yet despite recent gains, some analysts caution that the current momentum relies heavily on short-term capital flows, particularly from portfolio investors.

“To maintain long-term currency strength, Nigeria must focus on attracting more sustainable FDI, broaden its FX revenue sources, and implement lasting structural reforms,” Coronation analysts advised.

Outlook: cautiously optimistic

For now, the naira’s dip below the N1,500 mark is seen as a positive signal of improving investor confidence and liquidity. However, with the festive season approaching — often accompanied by higher demand for FX — the durability of the naira’s rebound will be tested.