The Nigerian naira extended its recent appreciation against the United States dollar and other major Western currencies on Wednesday, closing at N1,329 to the dollar as increased foreign exchange inflows continued to support the local currency.
The latest movement reinforced growing signs of relative stability in the foreign exchange market, with the naira maintaining a firm position around the N1,330/$ level despite fluctuations in trading activity.
At the official foreign exchange window, transactions were conducted between N1,323 and N1,336 to the dollar before the market settled at an NFEM rate of N1,329.6862.
Market analysts attributed the naira’s recent strength partly to improved foreign exchange liquidity, stronger inflows and relatively subdued demand for dollars for imports.
According to some analysts, the approach of the 2027 general elections could also influence import-related demand and foreign exchange activity in the coming months, particularly as businesses adjust their positions ahead of the election cycle.
Despite the naira’s positive performance, foreign exchange activities among financial institutions and market makers remained substantial. However, interbank dollar turnover moderated during the midweek session, reflecting a decline in the volume of transactions.
Data from the market showed that the number of interbank foreign exchange deals fell to 105 from 139 recorded in the previous session.
Similarly, NFEM interbank foreign exchange turnover declined by about 33 per cent to $93.655 million, compared with the $139.454 million recorded the previous day.
The decline in turnover came as the naira continued to attract positive market sentiment following a series of gains in recent trading sessions.
Traders Raise Outlook for Naira
The naira’s sustained appreciation has also prompted a more optimistic outlook among some foreign exchange traders, with projections that the exchange rate could strengthen to about N1,300/$ before the end of 2026.
That projection represents a shift from the average Broadstreet forecast of around N1,350/$ and reflects the extent of the naira’s recent rally.
Market participants are closely monitoring foreign exchange inflows, crude oil prices, remittances and the level of Nigeria’s external reserves as key indicators of the currency’s near-term direction.
The Central Bank of Nigeria’s recent disclosure that monthly remittance inflows had approached $1 billion has further strengthened expectations of improved dollar liquidity in the domestic market.
Remittances remain an important source of foreign exchange for Nigeria, alongside crude oil earnings, portfolio flows and other external inflows.
Reserves, Oil Prices Support Currency
Nigeria’s external reserves are also expected to receive further support from elevated crude oil prices and stronger foreign exchange inflows. Market expectations indicate that reserves could rise above $54 billion in the coming days, which would represent one of the strongest levels recorded in years.
The outlook for Nigeria’s external sector is closely tied to developments in the global oil market, where prices have remained elevated amid geopolitical tensions in the Middle East.
Oil prices were largely steady on Thursday as investors assessed the latest escalation in the United States-Iran conflict against indications that the immediate risk of a wider disruption to Middle Eastern oil supplies could remain contained.
Brent crude futures fell 0.13 per cent to $95.50 a barrel, while United States West Texas Intermediate crude edged up 0.04 per cent to $91.05 a barrel.
The two international benchmarks have remained volatile throughout the week following renewed military strikes involving the United States and Iran, which raised concerns about potential disruptions to crude oil production, exports and shipping routes in the region.
The latest price movements followed a particularly volatile trading session on Wednesday, when both Brent and WTI prices swung sharply within a range of roughly $3 as investors assessed developments in the Middle East.
Middle East Tensions Keep Oil Market on Edge
The escalation has introduced another layer of uncertainty into an already fragile global oil market.
The United States and Iran exchanged their most intense attacks since July, heightening fears that the conflict could widen and potentially affect critical energy infrastructure and shipping routes.
For Nigeria, sustained high crude oil prices could provide additional support for government revenue and foreign exchange earnings, provided oil production and export volumes remain stable.
Higher oil receipts could also strengthen the country's external reserves and improve the supply of dollars to the domestic foreign exchange market, potentially supporting further naira appreciation.
However, analysts caution that the currency outlook will continue to depend on the durability of foreign exchange inflows, import demand, monetary policy, oil market conditions and broader investor confidence.
For now, the naira’s movement around the N1,330/$ mark represents a notable improvement in market sentiment, with traders increasingly watching whether the recent rally can be sustained through the remainder of 2026.