Naira stabilises as central bank’s reforms take Hold, market confidence returns

By: Chidozie Nwali

Recent data from the Central Bank of Nigeria (CBN)  indicates a significant stabilisation in October, and even appreciation, of the Nigerian local currency Naira against the US Dollar, signaling the positive impact of the CBN comprehensive economic and foreign exchange (FX) reforms.

Data from the Nigerian Foreign Exchange Market (NFEM) shows the Naira trading around ₦1,463.45 to $1 as of Tuesday, below the ₦1500 psychological benchmark, and an improvement from earlier in the year when the exchange rate exceeded N1,600 to the dollar. This stability is underpinned by a narrowing gap between the official and parallel market rates, which the CBN Governor, Olayemi Cardoso noted has closed to less than two percent.

Start of October: The Naira hovered around ₦1,455 to ₦1,465 per US Dollar (October 10-13, 2025 CBN data points). The local currency saw a slight depreciation around the middle of the month, reaching a high of approximately ₦1,475/$ (October 17, 2025). However, rate has since firmed up, with the official closing rate on October 21, 2025, around ₦1,463.45 to $1.

Impact of Central Bank Reforms:

The CBN’s decisive policy shifts, implemented over the past two years, appear to be gaining traction in the market:

• The adoption of a unified, ‘willing buyer, willing seller’ exchange rate regime has significantly improved transparency and price discovery, drastically reducing arbitrage opportunities.
• The sustained increase in the Monetary Policy Rate (MPR) throughout late 2024 and 2025, peaking at 27.50% before a marginal ease to 27.00% in September 2025, has been crucial in mopping up liquidity and curbing inflationary pressures. This tight monetary stance is intended to anchor price stability and defend the Naira’s value.
• LiquIncreased FX market liquidity, bolstered by clearing the backlog of verified foreign exchange obligations and a return of investor confidence, has supported the Naira’s rally. The significant rise in foreign reserves to over $43 billion, 11 months  of import cover provides a strong buffer and further reduces vulnerability to external shocks.
• The combination of monetary tightening and exchange rate stability has led to a six-month consecutive drop in the headline inflation rate, reaching 18.02% in September 2025—the lowest in three years.

CBN Governor, Olayemi Cardoso, stated last week at the just concluded IMF/World Bank spring meeting in Washington DC that the reforms were “delivering results,” noting that the country is now “less leveraged and less vulnerable to exogenous shocks.”

While the current data reflects a period of positive momentum and growing market confidence, analysts stress the need for continued policy consistency and sustained non-oil revenue growth to maintain the Naira’s stability and translate macroeconomic gains into tangible relief for the average Nigerian consumer, especially concerning core and food inflation.