Nigeria’s Naira Strengthens Against the US Dollar: A Recent Story of Resilience

After years of volatility and pressure from global and domestic headwinds, the Nigerian naira has shown measurable strength against the US dollar in recent months, reflecting improvements in foreign exchange market dynamics and policy-driven stability. At the start of 2026, the naira extended the positive momentum it had built toward the end of 2025. On the first official trading day of the year, the local currency appreciated to around ₦1,430.84 per US dollar at the official foreign exchange market, marking a modest but meaningful gain from about ₦1,435.75/$ recorded at the close of December 2025. This movement represented a 0.34 percent increase in value, underscoring an early-year rise in demand for the naira and a better balance in dollar liquidity. The strengthening trend continued into the second trading week of January 2026, when the naira closed at approximately ₦1,424.50/$, up from roughly ₦1,431/$ a week earlier. This week-on-week appreciation reflected improving foreign exchange fundamentals, including higher external reserves and confidence among market participants in the stability of Nigeria’s external position. These gains were not isolated to the first weeks of 2026. Throughout late 2025, the naira had posted some of its strongest levels in more than a year. At times, the currency traded around ₦1,458/$, its best performance since earlier stages of the previous year, as the Central Bank of Nigeria (CBN) intensified efforts to stabilize foreign exchange markets through reforms and increased transparency. Over the full year of 2025, the naira’s performance was especially notable. It recorded one of its best annual improvements in over a decade, appreciating more than 7 percent against the US dollar and narrowing the gap between official and parallel market rates — a key indicator of market confidence and reduced speculative distortion. Underlying this relative strengthening has been a combination of policy actions and macroeconomic conditions: Central Bank reforms, including improved FX trading mechanisms like the Electronic Foreign Exchange Matching System (EFEMS), which enhanced price transparency and boosted investor confidence. Rising foreign reserves, often reaching multi-year highs, providing the central bank with greater capacity to support the naira and cushion external shocks. Renewed capital inflows and export performance that contributed to a more stable balance of payments and better FX supply dynamics. Despite the progress, analysts caution that risks remain, including global oil price fluctuations, inflationary pressures, and demand dynamics in the informal FX market. These factors continue to influence exchange rate behavior and could temper the pace of future appreciation.