The Nigerian foreign exchange market showed relative calm midweek as the naira posted a marginal gain against the US dollar, even as the Central Bank of Nigeria (CBN) opted to maintain its tight monetary stance following its latest policy meeting. The stability in the official market contrasts with renewed pressure in the parallel market, where the local currency weakened further.
Mild Gain in Official Market, Weakness Persists Elsewhere
In the Nigerian Foreign Exchange Market (NFEM), the naira appreciated slightly by 53 kobo, closing at N1,373.34 per dollar on Wednesday compared to N1,373.87 on Tuesday, according to CBN data.
Market activity, however, slowed. Turnover at the NFEM window dropped by 18.65 percent to $286.03 million, down from $351.60 million recorded the previous session, even though the number of deals remained unchanged at 261.
In the interbank segment, trading activity increased in frequency but not in value. The number of deals rose sharply by 47.37 percent, moving from 76 transactions to 112. Yet total turnover fell by 6.08 percent to $68.02 million from $72.42 million a day earlier.
Meanwhile, pressure persisted in the parallel market. The naira weakened by N5, closing at N1,395 per dollar compared to N1,390 previously. This movement widened the gap between official and black-market rates to N22, up from N17 earlier in the week.
CBN Holds Rates, Signals Policy Caution
Following its two-day Monetary Policy Committee (MPC) meeting, the Central Bank of Nigeria retained all key monetary parameters, keeping the Monetary Policy Rate (MPR) unchanged at 26.5 percent.
The asymmetric corridor was also left steady at +50/-450 basis points, while the Cash Reserve Ratio (CRR) for Deposit Money Banks remained at 45 percent and 16 percent for Merchant Banks. Liquidity ratio stayed unchanged at 75 percent.
CBN Governor Olayemi Cardoso said the decision reflected a careful reading of both domestic and global risks, especially rising geopolitical tensions.
He stated that Nigeria’s external position had strengthened significantly, noting: “Available evidence indicates that the impact of the crisis on the Nigerian economy has been largely muted due to the benefits of prior policy reforms.”
Cardoso also disclosed that gross external reserves rose to $49.49 billion as of May 15, 2026, up from $48.35 billion at the end of March, providing more than nine months of import cover.
Inflation Trends and Policy Outlook
Nigeria’s inflation rate climbed to 15.69 percent in April 2026, up from 15.38 percent in March, driven mainly by food and transport costs, according to the National Bureau of Statistics.
Despite the uptick, the MPC described the pressure as transitory, expressing confidence that disinflationary trends would resume as reforms take hold.
The committee highlighted structural improvements including exchange rate adjustments, stronger reserves, banking sector recapitalisation, and fiscal consolidation as key buffers against global shocks.
Market Reaction and Analyst Views
Commenting on the policy stance, Razia Khan of Standard Chartered Bank said the outcome was broadly expected by markets.
“Few surprises in the actual decision, with the CBN opting to hold all parameters, including the MPR at 26.5 percent, the corridor at +50/-450 basis points, and the CRR unchanged,” she said.
She added that the central message from policymakers was optimism that inflation pressures would ease soon:
“The big takeaway was that the CBN expects any near-term price pressures to be transient, with disinflation soon returning" she said.
However, she warned that risks remain elevated, particularly around inflation expectations and possible fiscal pressures ahead of the election cycle.
"We are less convinced. We're not sure inflation expectations are well-anchored. Fiscal policy in the run-up to the election could be a problem" Khan said.
Stronger Macro Outlook but Caution Remains
Economist Bismarck Rewane of Financial Derivatives Company said inflation could edge higher in the near term, potentially reaching 16.5 percent due to global energy tensions.
Still, he noted improved macroeconomic resilience.
“Nigeria is in a stronger position to have a stable, predictable and well-managed exchange rate,” he said on CNBC, citing improved reserves, higher oil prices, and ongoing reforms.
Reforms, Banking Sector Strengthen Confidence
The MPC also highlighted structural gains from recent policy reforms, arguing that without them, global commodity and energy shocks would have had a far stronger impact on domestic inflation.
It further welcomed the recent sovereign rating upgrade by S&P, describing it as evidence of improving macroeconomic fundamentals and policy credibility.
On the financial system, the committee confirmed the successful completion of banking sector recapitalisation, resulting in 33 stronger banks with improved balance sheets. It urged continued vigilance to safeguard stability in the post-recapitalisation period.
Despite persistent inflationary pressures and external uncertainty, policymakers maintained that Nigeria’s reform trajectory continues to reinforce investor confidence and strengthen economic resilience.