Naira extends rally as Central Bank shields foreign reserves

The naira has extended its year-to-date gains across foreign exchange market segments, supported by improved FX liquidity and the Central Bank of Nigeria (CBN)’s assurance that the country’s external reserves remain strong enough to support currency stability.

Data published by the Central Bank (CBN) showed that the naira appreciated by N80.11 year-to-date at the Nigerian Foreign Exchange Market (NFEM), with the dollar quoted at N1,350.74 on Tuesday, representing a gain of 5.9 percent from N1,430.85 at the start of the year.

However, on a day-to-day basis, the local currency weakened slightly by N1.07 from N1,349.67 quoted on Monday at the NFEM window, according to CBN data.

At the parallel market, the naira has also strengthened significantly, gaining N105 year-to-date to close at N1,395 on Tuesday from N1,500 at the beginning of the year. The currency also appreciated by N5 compared to the N1,400 per dollar recorded on Monday.

The naira’s gains have come even as Nigeria’s external reserves, which provide the CBN with the capacity to support the currency, declined by 2.96 percent to $48.54 billion as of April 20, 2026, from $50.02 billion recorded on March 11, 2026.

Olayemi Cardoso, governor of the CBN dismissed concerns over the decline in reserves, insisting that the country remains in a comfortable external position.

“On the decline in reserves and whether there is any cause, the answer is there isn’t. It is normal,” Cardoso said in Washington D.C.

He noted that Nigeria’s reserves remain far above the International Monetary Fund’s recommended minimum threshold.

“We already have way beyond what the IMF even recommends to have as a minimum reserve level. I think we are about 13 months now, so we are in a very comfortable position. So it is normal, it will happen, and honestly, there’s nothing to worry about,” he said.

Cardoso said the improved liquidity in the FX market means the naira is now less dependent on direct Central Bank intervention than in previous years.

“The foreign exchange system that used to operate in those days is very different from what it is now. Then you had a Central Bank that was primarily the only one that determined that market. That is different now. Now it is market-driven. There’s more liquidity in the market,” he said.

According to him, investor confidence in the market has improved, reducing the significance of short-term fluctuations in reserve levels.

“There’s confidence. Investors come in and go out as they like. So why do you want to worry about something that happens relatively modestly on the road of travel?” Cardoso said.

“The market is so liquid that it operates on its own. So in a situation like that, the reserve level is a great thing to have, but focusing on that when you have such huge liquidity in the market is less relevant than it was about three years ago.”

Analysts at FMDA said the naira appreciated by 1.66 percent to an average of N1,345.93 last week, helped by stronger FX liquidity conditions. Interbank turnover rose by 9.5 percent during the period, reflecting improved market activity.

Further data from FMDQ showed that total foreign exchange inflows into the Nigerian FX market rose by 45 percent month-on-month to $4.4 billion in February 2026, marking the third consecutive month of improved market liquidity.

Analysts at Quest Merchant Bank said the improvement in FX supply was largely driven by stronger offshore investor participation.

“Consistent with historical patterns, the primary driver of the robust FX supply was stronger offshore investor participation, supported by Nigeria’s attractive carry trade opportunities, which have continued to draw global investors seeking higher returns,” the analysts said.

The sustained rise in FX inflows and stronger investor participation have helped reinforce the naira’s recovery this year, even as the Central Bank continues to reassure the market that reserve levels remain adequate to support macroeconomic stability.