The naira appreciated in Nigeria’s official foreign exchange market on Tuesday, benefiting from enhanced liquidity conditions, even as the country’s external reserves continued their recent downward trend, highlighting the delicate balance facing policymakers.
Data from the Central Bank of Nigeria showed the local currency gained N5.75 against the dollar, with the greenback quoted at N1,382.63, up 0.42 percent from Monday’s N1,388.38 at the Nigerian Foreign Exchange Market (NFEM).
In the parallel or “black” market, the naira remained steady at N1,415 per dollar. However, the gap between official and parallel market rates widened to N33 from N27 a day earlier, reflecting lingering distortions in pricing across the two segments.
Rising FX Inflows Support the Naira
Foreign-exchange inflows into Nigeria increased for the third consecutive month in February, driven largely by strong participation from offshore investors. According to FMDQ data, total FX inflows rose 45 percent month-on-month to $4.4 billion, as foreign portfolio investors sought to capitalise on Nigeria’s high-yield environment.
Despite this positive trend, Nigeria’s external reserves — a key buffer for currency stability — have declined for six straight sessions, falling 0.84 percent to $49.60 billion as of March 23, 2026, from $50.02 billion recorded on March 11.
Quality of Reserves Shows Significant Improvement
Analysts, however, point to a marked improvement in the usability and composition of Nigeria’s external reserves. A report by VNL Capital Asset Management shows net usable reserves — funds readily available for immediate deployment — have risen from $3.99 billion at the end of 2023 to $34.80 billion by the end of 2025.
Gross reserves also exceed $45 billion, providing nearly 10 months of import cover, well above conventional adequacy thresholds. This enhanced position is credited to structural reforms, including unification of the FX market, settlement of legacy swap obligations, removal of fuel subsidies, and improved transparency in reserve reporting.
The Central Bank’s strategic accumulation of gold has further strengthened reserves. Gold holdings increased from $2.6 billion in late 2025 to $3.5 billion in Q1 2026, funded using domestic mining output, reducing dependence on foreign currency while diversifying reserve composition.
Policy Measures Bolster Stability
Combined with tighter monetary conditions, growing remittances, non-oil export earnings, and foreign investment inflows, these measures have reduced liquidity risks and provided the Central Bank with greater flexibility to manage exchange rate pressures and external shocks.
Analysts say the improvements signal a more resilient, transparent, and sustainable external reserve position, allowing Nigeria to navigate short-term pressures without resorting to additional borrowing.
Overall, while short-term volatility persists, the naira’s recent gains reflect strengthened underlying fundamentals and enhanced policy credibility in the management of Nigeria’s foreign-exchange landscape.