Nigerian Naira strongest since January as central bank policy yield results

By: Chidozie Nwali

The Nigerian local currency (Naira) has marked a significant milestone, appreciating to a 10-month high of N1,444.42 per US dollar according to the official Nigerian Foreign Exchange Market (NFEM) on Wednesday.

This robust performance, continuing a recent upward trajectory, is the strongest closing rate for the currency since the introduction of the new Electronic Foreign Exchange Matching System (EFEMS) by the Central Bank of Nigeria (CBN).

According to latest CBN data, the Naira opened the week at N1,452/$ on Monday. Meanwhile the currency has seen steady appreciation of Approximately 13.04% ( N216.70) against the dollar since December 2024 when EFEMS Debut at N1,661.12/$.

The market experienced significant activity, with the intraday low (strongest rate) showing the Naira tested even stronger levels against the dollar, indicating robust supply and positive market sentiment.

This appreciation marks a substantial climb from its weaker positions earlier in the year, trading between the N1,500/\$ and N1,600/\$ range for much of the first eight months of the year, underscoring the success of the CBN’s recent policy actions.

Market analysts attribute the sustained strength of the Naira to a combination of strategic CBN policies, a surge in capital inflows, and improved liquidity in the official trading window.

The CBN’s aggressive interest rate (27%), which saw the Monetary Policy Rate (MPR) climb significantly, have made Naira-denominated assets, particularly high-yield instruments like OMO bills, highly attractive to Foreign Portfolio Investors (FPIs). This has resulted in substantial dollar inflows.

FPI is currently the main driver of foreign capital inflows; FPI (investments in stocks and bonds) surged to $1.3 billion in September, far outweighing the FDI figure.

FDI inflows experienced a remarkable surge in September, rising to $295 million from a much lower figure of just $22.4 million in August 2025.

The adoption of the EFEMS trading system has enhanced transparency, efficiency, and price discovery in the official market. This structural reform has discouraged speculative activities and redirected more foreign exchange trading from the parallel market to the official window.

Nigeria’s recent removal from the Financial Action Task Force (FATF) grey list has significantly improved the nation’s reputation on the global stage. This move has lowered compliance costs for international transactions involving Nigerian banks, further boosting investor confidence and easing international capital flows.

While the appreciation is a major win for the CBN and the government, analysts remain cautiously optimistic about its long-term sustainability.

Furthermore, external reserves have shown signs of crossing the $43 billion (eleven month of import cover) threshold, providing the Central Bank with greater capacity to defend the currency against shocks. .

Economists agree that maintaining the current trajectory will necessitate continued adherence to market-friendly policies and a commitment to structural reforms that permanently boost Nigeria’s non-oil export earnings. The current recovery provides a crucial window of opportunity to solidify these gains and bring greater stability to the nation’s volatile foreign exchange landscape.