Is Naira really stable now?

Ibrahim Apekhade Yusuf and Nduka Chiejina, in this report examine the positive trajectory of the local currency in the last few months against the background of cynicisms by bookmakers whose projections have been on the contrary

To say the naira, the nation’s local currency has been the butt of derisive jokes as a result of its rather unstable nature was just as well. But contrary to bookmakers who have continually predicted doom for the naira, things are literally looking up for the poor naira with many almost wondering what may have caused the good fortune.

Crux of the matter

In early 2024, the Naira was among the worst-performing currencies in Sub-Saharan Africa, with about 43% depreciation by August of the same year. The depreciation has contributed to higher domestic prices and inflation, particularly for imported goods.  The naira was indeed in dire straits so much that the World Bank identified it as one of Africa’s worst-performing currencies in 2024 due to significant depreciation.

CBN policy moves drive turnaround

However, recent, bold policy reforms aimed at a market-determined exchange rate have been credited with improving liquidity and reducing volatility.

Nigeria’s naira appreciated by 6.87% in 2025, ending years of depreciation due to CBN reforms Capital inflows reached nearly $21 billion, driving investor confidence and strengthening external reserves moderate inflation decline is expected in 2026, with potential risks from policy lapses and FX market pressure

Nigeria’s currency staged a remarkable turnaround in 2025, recording its first annual appreciation in more than a decade as sweeping reforms by the Central Bank of Nigeria (CBN) reshaped the foreign exchange market.

According to a 2026 economic outlook by investment house Comercio Partners titled “Policy Shock to Structural Reset: Charting a Sustainable Economic Path,” the naira strengthened by about 6.87 per cent against the US dollar during the year. The Naira’s appreciation shows the impact of CBN’s robust policies.

The gain marked the currency’s first annual rise in 13 years, signalling a shift from prolonged depreciation to renewed stability.

The naira began 2025 trading around N1,541/$ in the official market but ended the year stronger at about N1,435/$ on December 31, reflecting improved liquidity and growing investor confidence.

Analysts attribute the currency’s rebound largely to deliberate policy actions by the CBN aimed at improving transparency and efficiency in the FX market. Key reforms included the launch of the Nigerian Foreign Exchange Code, which aligns Nigeria’s FX practices with global standards and promotes transparency, accountability, and ethical conduct among banks and dealers. The apex bank also introduced the Electronic Foreign Exchange Matching System, designed to enhance price discovery and efficiency in interbank FX trading. These measures were built on earlier reforms between 2023 and 2024 that unified Nigeria’s exchange-rate windows and allowed the market to determine pricing more freely.

Comercio Partners noted that the reforms helped restore confidence in the system and significantly reduced opportunities for manipulation.

Stronger reserves and capital inflows Improved investor sentiment translated into substantial capital inflows and stronger external buffers.

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According to the report, Nigeria attracted nearly $21 billion in capital inflows in the first ten months of 2025, representing a 70 per cent increase compared with 2024. These inflows were driven by higher remittances, stronger portfolio investment activity, and improved oil-related earnings.

At the same time, external reserves expanded by more than 11 per cent, strengthening the country’s ability to defend the currency during market pressures. Domestic refining capacity also helped reduce the demand for imported fuel, easing pressure on foreign exchange demand. Together, these factors contributed to sustained naira firmness throughout much of the year and narrowed the gap between official and parallel market exchange rates. Inflation dynamics begin to shift.

Alongside the currency’s recovery, Nigeria’s inflation trajectory began to change in 2025. The shift was partly triggered by the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics. The reference year was updated from 2009 to 2024, and the consumption basket was revised to better reflect current spending patterns.

Naira gets a massive boost as Nigeria’s net external reserves hit four-year high at $34.80bn Following the adjustment, headline inflation dropped from 34.8 per cent under the old base year to 24.48 per cent under the new methodology. While the decline largely reflected statistical changes rather than immediate price reductions, it also helped reduce apparent volatility in the inflation data.

Economists say the stabilising exchange rate also played a role by easing imported inflation pressures. After severe volatility in 2023 and 2024, caused by FX shortages, multiple exchange-rate windows, and policy uncertainty, the improved liquidity in 2025 reduced speculative pressure and helped stabilise prices for imported goods and production inputs. Inflation outlook for 2026.

Looking ahead, analysts expect inflation to continue moderating in 2026, though the pace of decline may slow.

Comercio Partners projects headline inflation to settle within 14–16 per cent in its base-case scenario, assuming policy continuity, gradual monetary easing, and a stable FX market. In a best-case scenario, inflation could fall to 10–11 per cent if foreign exchange stability persists and agricultural output improves. However, risks remain. Inflation could climb back to 18–22 per cent if policy discipline weakens or if renewed pressure emerges in the FX market.

Despite the improving macroeconomic outlook, Nigeria’s public debt remains a significant challenge. Debt servicing for 2026 is projected at N15.52 trillion, accounting for roughly 45 per cent of expected government revenues.

Analysts warn that this could limit fiscal space for infrastructure development and social investments. Nevertheless, non-oil revenue performance is showing improvement. By August 2025, federation revenues from non-oil sources had risen 40.5 per cent year-on-year, reflecting stronger tax administration and reforms aimed at broadening the revenue base. Growth outlook ahead of the 2027 elections Nigeria’s economy is expected to expand moderately in 2026, with GDP growth projected between 4.0 and 4.5 per cent.

Economists note that pre-election spending ahead of the 2027 general elections could support economic activity, though this time growth is expected to be more balanced than in previous cycles that relied heavily on oil revenues. Non-oil sectors and a gradual recovery in oil production are likely to drive the expansion.

Overall, Comercio Partners described the outlook as “guardedly optimistic.” If reforms remain consistent and global conditions remain supportive, the progress recorded in 2025 could mark the beginning of a broader economic recovery. Nigeria’s robust external reserves keeps naira afloat against the US dollar.

With investor confidence gradually returning and capital flows improving, analysts say Nigeria may be entering a new phase of currency stability and external strength after years of volatility. Naira declines against US dollar Legit.ng earlier reported that the naira continued its decline against the United States Dollar last Monday, closing at N1,378.02/$1 at the Nigerian Foreign Exchange Market (NAFEM). The new exchange represented a N14.63 or 1.07% depreciation when compared to last Friday’s N1,363.39/$1.

The Nigerian currency also weakened against other major currencies, trading at N1,846.14/£1 versus N1,836.49/£1 for the British Pound and N1,612.98/€1 against the Euro, down from N1,609.22/€1 in the previous session.

The Naira has been on a surprising upward trend against the US Dollar, sparking conversations across Nigeria’s financial markets.

The naira continues to appreciate modestly trading around the 1350 range to the dollar at the official window as the CBN reopens FX market.

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The Naira appreciated to ₦1500.92 per US Dollar in the official market on September 10, 2025, its highest level since March.

Aliko Dangote, chairman of the Dangote Group, has predicted that the naira will strengthen to N1,100 per dollar in 2026.

Dangote spoke last month during the launch of the national industrial policy 2025 by the federal government.

The naira has strengthened in recent weeks, appreciating to N1,335.95 per dollar at the official market and N1,380/$ at the black market on Tuesday.

Commenting on the development, the billionaire businessman said the country has the potential to generate large-scale consumption, industrial growth, and disposable incomes.

”I mean today if you look at it, your excellency, I believe with the policies that you have implemented in government, people now have started seeing the result and manufacturers are very very happy,” Dangote said.

”Today, the dollar is N1,340. Mr. Vice-President, I can assure you with what I know, blocking all this importation and co, naira this year will be as low as N1,100 if we are lucky. “The only thing is for maybe the government to stop the naira from getting stronger so that they will keep collecting more naira. But it’s a catch-22 situation where, now, if the naira gets stronger it means that everything will go down. Everything will go down because we are an import-based country which we shouldn’t be. “What you should be is to manufacture all the things that we need.”

This is just as Femi Otedola, the chairman of First HoldCo, expressed optimism that the naira will strengthen meaningfully and will trade below N1,000/$1 before year-end as domestic refining is fully underway.

Echoing similar sentiments, Professor Iyabo Obasanjo, the daughter of the former President Olusegun Obasanjo, has said that the prevailing stabilisation of the Naira against the dollar is a plus for President Bola Ahmed Tinubu’s administration and something commendable.

Obasanjo, who described the phenomenon of “stabilisation of the Naira is a big one,” noted that the predictability in the exchange rate is crucial for business growth and economic prosperity.

”So, I think that the economic stability cannot be underestimated because when people can predict income and exports, they do it, things get better because then you are not buying something at one price because of the dollar instability, and having to sell, buying it at a higher price, and then it changes everything.

“There are also some improvements in security, mainly because now we have a lot of collaboration going on. The international collaboration, the President’s visit to different countries for trade and economic development, is rising. And that is the key to everything we do. I think that does.”

As a corollary, experts hold the view very strongly too that the fate of the naira is more assured now than ever before, thus giving a lie to the contrary views being expressed by naysayers who had predicted that things would keep going south for the local currency.

World Bank’s verdict

This is just as the World Bank emphasised that for the naira’s stability to last, Nigeria must focus on attracting long-term foreign investment and enhancing transparency.

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The bank’s reports suggest that while the initial shift toward a floating rate caused immediate depreciation, the subsequent policy adjustments have been necessary for long-term economic health, as seen in this video from January 2026 and this video from January 2026.

“The naira’s real exchange rate is at its most competitive in at least 20 years,” said World Bank’s Chief Economist Indermit Gill.

Naira truly gaining momentum

Last Monday, the naira exchanged at ₦1,382 per US dollar across Nigeria, reflecting a stable performance in the foreign exchange market as the local currency maintained the same value against the greenback during the day’s trading activities.

This rate represents no change from the previous trading level of ₦1,382 per dollar recorded in the last trading session, indicating that the naira neither improved nor worsened in value. The steady movement shows that the currency held firm at the same level as the previous session, marking a relatively stable and balanced trend in the market without any appreciation or depreciation compared to the earlier rate.

Market analysts say the unchanged exchange rate suggests that the supply of the US dollar remained largely balanced with demand during Monday’s trading session, preventing additional pressure on the local currency and allowing it to retain the same position recorded previously.

The stable performance signals a continued equilibrium in Nigeria’s foreign exchange market, with observers noting that sustaining this level could help limit short term volatility if liquidity conditions remain steady in the coming trading sessions.

For businesses, particularly importers, the steady exchange rate may help them maintain predictable cost projections associated with sourcing goods and raw materials from international markets compared to the previous trading session.

Manufacturers, retailers, and service providers are expected to keep monitoring market movements closely, as the currency remains sensitive to liquidity conditions, investor sentiment, and policy direction from the Central Bank.

At ₦1,382 per dollar, the naira recorded an unchanged day-on-day performance, maintaining the same level as the previous session and reflecting stability rather than an improvement or decline within Nigeria’s foreign exchange market.

Interestingly, a former Deputy Governor of the Central Bank of Nigeria (CBN), Tunde Lemo, has described President Bola Ahmed Tinubu’s economic reforms as timely and necessary, despite the initial hardship experienced by Nigerians.

Speaking in a television magazine programme monitored on TVC programme, Lemo recalled that the tough decisions by President Bola Tinubu have made a lot of positive impacts three years on.

“It was tough at the beginning,” Lemo admitted, “but we now have a new price discovery and a new equilibrium.”

He noted that the reforms have led to more optimal allocation of resources, particularly in the foreign exchange market, where stability is gradually being restored.

Lemo stated that Nigeria is currently experiencing not only exchange rate stability but also a stable outlook, adding that based on existing cash flow trends, the Naira is unlikely to witness serious depreciation except in the event of unforeseen external shocks such as geopolitical crises.

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According to Lemo, the reserve accretion being recorded was underpinned by fundamental changes in the foreign exchange market and broader economy.

Lemo argued that the improvement in reserves is not temporary. “What I’m saying in essence is that the reserve accretion that we’re seeing is very, very sustainable given what we have seen in the market,” he said.

According to him, one of the most significant reforms was not only the removal of the petrol subsidy but also the elimination of what he described as the larger “forex subsidy.” He noted that in the past, only a small fraction of Nigerians had access to dollars at heavily subsidised official rates of around N400 to the dollar, while the majority sourced foreign exchange at rates as high as N1,400 or N1,700.

“The two were matched. Of course, it felt as if the world was collapsing, but that was the right thing to do. What have we seen today? A relatively stable foreign exchange system,” he said.

He also pointed to Nigeria’s improving trade position, particularly rising non-oil exports, which he said have contributed to a trade surplus. In addition to export growth, Lemo highlighted strong diaspora remittances, estimated at about $600 million monthly, as a steady source of foreign exchange inflows.

Beyond portfolio flows, he noted that foreign direct investment is improving, with multinational companies reinvesting and expanding operations, thereby bringing in longer-term capital. He stressed that these inflows are more stable than foreign portfolio investment, often described as “hot money.”

Lemo further explained that reduced import dependence, especially on refined petroleum products, has strengthened Nigeria’s external position. In the past, he said, nearly all the foreign exchange earned from crude oil exports was used to import fuel. today, that pressure has eased, providing significant cash flow benefits and supporting reserve growth. Some oil producers are also retaining and utilising their foreign exchange earnings internally, reducing demand in the official market.

He commended the CBN’s strategy of purchasing dollars to curb excessive appreciation of the naira, describing it as a smart move to protect exports and domestic industry. According to him, a rapidly appreciating currency can undermine local production by making imports cheaper and exports less competitive.

“A stable currency over time is better than one that appreciates too quickly,” Lemo said, warning that sharp appreciation could increase the propensity to import, weaken local industries and ultimately worsen unemployment.

For these reasons, he maintained that the current combination of trade surplus, diversified inflows, subsidy reforms and cautious central bank intervention makes the naira’s stability and the ongoing build-up in reserves fundamentally sustainable.