Stronger Dollar Supply Boosts Naira as Nigeria’s Foreign Reserves Rise

The naira strengthened further against the United States dollar last week, supported by increased foreign exchange supply and improved liquidity in the Nigerian currency market.

Data from the Central Bank of Nigeria showed that the naira closed at N1,346.49 per dollar in the official foreign exchange market, representing a gain of N11.11 over the five trading days of the week.

The latest appreciation amounts to 0.83 per cent compared with the previous week, as improved availability of dollars helped ease pressure on the naira and supported more stable trading conditions.

The currency also recorded a slight improvement in the parallel market, where it closed at approximately N1,400.61 per dollar.

Market conditions during the week were described as relatively balanced, with demand and supply showing signs of improvement.

Foreign investors, exporters and non-bank corporate entities were among the key sources of dollar liquidity during the period.

Their increased participation helped provide additional foreign exchange and supported the naira’s recent recovery.

Meanwhile, Nigeria’s gross external reserves continued to strengthen, rising by 0.65 per cent to $52.657 billion.

The increase further improved the country’s external liquidity position and provided additional support for the domestic currency.

The combination of stronger reserves and improved foreign exchange supply has raised expectations that the naira could maintain its recent stability in the coming weeks.

Some market participants are projecting that the exchange rate could trade around N1,350 to the dollar by the end of 2026 if current conditions persist.

Nigeria has also benefited from developments in the international oil market, with crude oil prices extending recent gains amid heightened geopolitical tensions.

Brent crude rose by 0.61 per cent to $94.39 per barrel, while West Texas Intermediate increased by 0.23 per cent to $87.06 per barrel as of Sunday evening.

Higher crude oil prices could provide additional support for Nigeria’s external position by increasing export earnings and potentially strengthening foreign exchange inflows.

However, analysts noted that continuing geopolitical tensions involving countries such as Iran and Russia could cause further volatility in global oil prices.

With foreign exchange liquidity improving, external reserves rising and oil prices remaining relatively strong, the naira is expected to remain comparatively stable in the near term.

However, market analysts caution that the currency’s outlook will continue to depend on sustained dollar inflows, oil earnings, reserve accumulation and the overall demand for foreign exchange in the Nigerian economy.

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