Naira strengthens to N1,322.50/$ as reserves hit $54.08bn, but F

Nigeria’s foreign-exchange market has entered a markedly stronger phase, with the naira appreciating to N1,322.50 per dollar and gross external reserves climbing to $54.08 billion, even as foreign-exchange turnover fell sharply, highlighting both the improvement in the country’s external buffers and the uncertainty over the depth of underlying dollar demand.

The naira closed Friday, September 4, at N1,322.50/$ at the Nigerian Foreign Exchange Market (NFEM), unchanged from the previous session but stronger than the N1,335.50/$ recorded at the start of the week.

That represented a weekly gain of N13, or 0.97 per cent, and extended the currency’s appreciation from the N1,337/$ level recorded on August 28. The naira has now gained N14.50, or 1.08 per cent, since the end of August.

The currency strengthened through the first four trading sessions of the week, moving from N1,335.50/$ on August 31 to N1,329/$ on September 1, N1,324.50/$ on September 2 and N1,322.50/$ on September 3 before holding at that level on Friday.

Friday’s weighted average rate stood at N1,321.22/$, with transactions recorded between N1,319.45/$ and N1,324/$, indicating relatively limited volatility around the prevailing market level.

The latest appreciation, however, came alongside a significant decline in official-market activity.

NFEM turnover for August 31 to September 3 was estimated at $2.14 billion, down from about $3.19 billion in the preceding week. The N1.05 billion decline represents a contraction of roughly 33 per cent.

The combination of a stronger currency and lower turnover is important for businesses and investors because it suggests that the naira’s latest gains may be reflecting reduced demand pressure as much as increased dollar supply. A sustained recovery would ultimately require strong and durable foreign-exchange inflows capable of meeting renewed demand when market activity increases.

The most significant improvement, meanwhile, has been recorded in Nigeria’s external reserves.

Central Bank of Nigeria data showed gross external reserves at $54.08 billion on September 3, compared with $53.99 billion on September 2 and $53.90 billion on September 1.

The latest position represents an increase of about $8.5 billion, or roughly 18.7 per cent, from the beginning of the year, when reserves stood at about $45.56 billion. It also marks Nigeria’s highest reserve position since December 2008, when reserves stood at about $54.21 billion.

On a year-on-year basis, the improvement is even more pronounced, with reserves rising from about $41.50 billion on September 3, 2025, to $54.08 billion a year later.

The acceleration has been particularly visible in recent weeks. Reserves climbed above $52 billion in August, crossed $53.11 billion on August 24, reached $53.51 billion on August 28, rose to $53.81 billion on August 31 and moved above $54 billion three days later.

The reserve position is also now about $3.04 billion above the CBN’s projected $51.04 billion level for the end of 2026, providing the monetary authorities with a substantially larger external cushion than anticipated.

The improvement is coming against a backdrop of stronger oil-sector earnings and other foreign-exchange inflows, while higher formal remittance flows and portfolio investment have also supported the external position.

Nigeria’s oil output, although volatile, has remained significantly stronger than during periods of severe production losses. NNPC data showed crude oil and condensate production averaging 1.68 million barrels per day in April, 1.73 million bpd in May and 1.72 million bpd in June, before easing to 1.68 million bpd in July.

However, July also demonstrated the vulnerability of the external position to disruptions in the oil sector, with NNPC reporting a sharp decline in revenue and profit as production and gas output weakened.

NNPC revenue fell to N3.09 trillion in July from N4.39 trillion in June, while profit after tax dropped to N279 billion from N535 billion. Crude oil and condensate production also declined to 1.68 million bpd from 1.72 million bpd in June.

For Nigerian businesses, the stronger naira offers immediate relief by lowering the local-currency cost of imported machinery, raw materials, technology, spare parts and other dollar-denominated inputs. Companies with foreign-currency obligations also stand to benefit from a lower naira cost of servicing those liabilities.

For investors, the bigger significance lies in the combination of currency appreciation and stronger reserves.

A naira trading around N1,322/$, supported by an external reserve buffer above $54 billion, improves visibility for companies with significant foreign-exchange exposure and reduces some of the currency risk that has complicated corporate earnings and investment decisions in recent years.

Yet the sharp decline in NFEM turnover means investors may remain cautious about declaring a structural currency recovery.

The next test will be whether the naira can retain its gains when dollar demand strengthens and whether reserve accumulation can continue without excessive dependence on oil receipts.

Monetary conditions also remain tight. At its July 20–21 meeting, the CBN’s Monetary Policy Committee retained the Monetary Policy Rate at 26.5 per cent, while keeping the Cash Reserve Ratio at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent on non-TSA public-sector deposits.

The tight monetary stance, alongside stronger external buffers, has helped create a more supportive environment for currency stability, although the sustainability of the gains will ultimately depend on the durability of foreign-exchange inflows and Nigeria’s ability to broaden its non-oil sources of dollar earnings.

The latest numbers therefore point to a significant turnaround rather than a finished recovery: the naira is substantially stronger, reserves are at their highest level since 2008 and the country has rebuilt a sizeable external cushion, but the fall in market turnover shows that the foreign-exchange market still has to prove that the improvement can withstand a fresh rise in dollar demand.

For the economy, the challenge is no longer merely rebuilding reserves. It is converting the stronger external position into durable currency stability, lower business costs and greater investor confidence.