Naira strengthens to N1,337 as reserves hit $53.11bn, FX

Nigeria’s external position has strengthened sharply as the naira appreciated to N1,337/$ on the official market while foreign exchange reserves climbed to $53.11 billion, their highest level in more than 17 years, even as weekly FX turnover almost halved.

The latest combination of stronger reserves and a firmer naira provides the Central Bank of Nigeria (CBN) with a substantially larger external buffer at a time when dollar-market activity has become more uneven.

CBN data showed the naira closed at N1,337/$ on August 28, compared with N1,349.99/$ on August 24, representing a 0.96 per cent weekly appreciation. The currency traded within a range of N1,335/$ to N1,350/$ during the week.

The gain came despite a sharp contraction in official FX market turnover.

Foreign exchange transactions through the Nigerian Foreign Exchange Market (NFEM) fell 48.7 per cent week-on-week to $2.71 billion, from about $5.28 billion recorded in the previous trading week.

Turnover was concentrated on August 26 and 27, when transactions reached approximately $913.76 million and $1.06 billion, respectively, while August 24 recorded $731.18 million. The market was closed on August 25 for a public holiday.

The latest decline in turnover contrasts sharply with the previous week, when official FX activity surged to more than $5 billion.

Yet the naira continued to strengthen, suggesting that lower turnover did not translate into renewed pressure on the currency.

The naira also appreciated marginally in the parallel market, closing at N1,403/$, compared with N1,407/$ the previous day.

The stronger currency performance coincides with a significant improvement in Nigeria’s external reserves.

CBN data showed reserves reached $53.112 billion on August 24, up from $49.96 billion on June 3, representing an increase of about $3.15 billion in 82 days.

The latest level is the highest Nigeria has recorded since January 12, 2009, when reserves stood at about $53.25 billion, leaving the country only about $142 million short of that level.

The reserve accumulation has accelerated since June, rising from $51.53 billion on July 3, crossing $52 billion on July 27 and reaching $52.86 billion on August 21 before moving above $53 billion.

The improvement has strengthened Nigeria’s capacity to withstand external shocks and support confidence in the foreign exchange market.

Analysts have attributed the reserve buildup partly to stronger dollar inflows, including improved oil earnings and capital flows. Rising crude prices have also increased Nigeria’s foreign exchange earnings, although the durability of the reserve gains remains dependent on sustained external inflows.

The stronger reserves also come as the CBN maintains a policy framework designed to improve the functioning of the FX market rather than rely heavily on direct intervention.

CBN Governor Olayemi Cardoso has previously said the apex bank’s interventions now account for only about 1.2 to 1.3 per cent of total FX turnover, while reforms including the FX Code, electronic trading platform and revised foreign exchange manual have improved market structure.

The central bank has also said Nigeria now has stronger buffers to absorb external pressures.

For businesses, the naira’s move towards N1,337/$ is significant because sustained currency stability can improve visibility over imported input costs, external debt obligations and investment planning.

However, the sharp fall in FX turnover introduces a note of caution. Lower turnover can reflect reduced market demand or fewer large transactions and does not automatically mean that liquidity has structurally improved.

The key distinction is therefore between a stronger naira and deeper FX liquidity.

For now, Nigeria is enjoying both a significantly larger reserve cushion and a stronger exchange rate than earlier in the year. The challenge is to ensure that the $53.11 billion reserve buildup and N1,337/$ exchange rate reflect durable improvements in foreign-exchange supply, export earnings and investor confidence, rather than a temporary market reprieve.