Naira records four-month high of N1,526.15 on improved liquidity

The naira on Wednesday surged to a four-month high of N1,526.15 per dollar in the official foreign exchange (FX) market, supported by improved liquidity as foreign portfolio investors (FPIs) continue to inject dollars into the economy.

This marks the strongest level since March 14, 2025, when the naira traded at N1,517.93 at the official market.

According to data from the Central Bank of Nigeria (CBN), the naira appreciated by 0.2 percent on Wednesday, compared to N1,529.57 quoted the previous day at the Nigerian Foreign Exchange Market (NFEM).

The parallel market also saw a modest gain, with the naira closing at N1,557 per dollar, improving from N1,560 the day before, street traders confirmed.

In the past six weeks, FPIs have emerged as the dominant source of FX inflows, overtaking exporters, non-bank corporates, and even the CBN. Their sustained interest in Nigeria’s fixed income market has bolstered FX supply and supported the naira’s upward trajectory.

Analysts at FSDH Merchant Bank noted that the naira’s gradual appreciation and the narrowing gap between the official and parallel market rates reflect growing confidence in the FX market. They attributed this development to the CBN’s clear policy direction, which has curbed speculative demand, encouraged FX inflows, and diminished opportunities for arbitrage and rent-seeking.

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However, the analysts cautioned that external pressures could persist without deeper structural reforms. While recent stability is a positive sign, Nigeria’s external reserves remain susceptible to global interest rate dynamics, oil production levels, and the speed of domestic economic reforms. They warned that in the absence of new FX sources, such as diaspora bonds, multilateral concessional credit, increased FDI, and non-oil exports, the reserve buffer could come under further pressure in the second half of 2025.

Last week, the FX market recorded total inflows of $1.03 billion, with FPIs accounting for the largest share at 36.98 percent the sixth consecutive week of dominance. Non-bank corporates followed with 27.56 percent, exporters contributed 22.39 percent, while others accounted for 13.06 percent. The CBN also added $96.3 million in inflows, according to a report by Coronation Merchant Bank.

As of June 23, 2025, FPIs accounted for 67.29 percent of total FX inflows, followed by non-bank corporates at 13.02 percent, exporters at 10.87 percent, and the CBN at 8.43 percent. A week earlier, on June 16, FPIs also led FX inflows, while non-bank corporates and exporters contributed 37.36 percent and 23.08 percent, respectively. The CBN reported no inflow that week.

Olayemi Cardoso, governor of the CBN, reaffirmed the Bank’s commitment to attracting $1 billion in monthly diaspora remittances. He stressed the importance of strict adherence to the FX Code and regulatory frameworks as key to fostering market stability and rebuilding trust among stakeholders.