The Nigerian naira is staging its strongest comeback in years, fueled by surging foreign reserves, declining speculative activities in the foreign exchange market, and sweeping reforms introduced by the Central Bank of Nigeria (CBN). The currency, which had been battered by years of volatility and sharp depreciation, is now regaining investor confidence and market credibility, writes JOSEPH INOKOTONG.
BEGINNING from when the naira struggled to maintain relevance against the United States dollar, trading at historic lows across both official and parallel markets, Nigeria’s local currency has begun to recover lost ground. As of late September 2025, the naira traded at N1,475/$ at the official window and about N1,460/$ in the parallel market, marking its strongest position this year. The gap between both markets, once wide enough to encourage arbitrage and speculative hoarding of foreign exchange, has now narrowed to an almost negligible margin.
At the heart of this recovery is a steady rise in Nigeria’s external reserves, now standing at $43.05 billion, up from $40.51 billion in July. With an import cover of over eight months and a current account surplus that more than doubled in the second quarter of 2025, the Central Bank of Nigeria (CBN) has been able to reassure investors and businesses of the economy’s resilience.
But beyond the numbers, the naira’s rally tells a larger story of institutional reforms, market confidence, and a determined policy shift aimed at reining in speculation and restoring stability.
A Currency’s Reputation Restored
For Nigeria, the naira is more than a medium of exchange. It is a symbol of national identity and economic sovereignty. Years of depreciation had not only weakened its purchasing power but also eroded confidence in the financial system. Businesses struggled with multiple exchange rates, importers could not access forex on time, and ordinary Nigerians bore the brunt of skyrocketing inflation.
Today, optimism is returning. Market analysts, policy experts, and even small-scale currency dealers acknowledge that speculative trading, a major factor behind the naira’s volatility, has declined sharply. With liquidity injections, improved reserves management, and tighter compliance with forex rules, the CBN has successfully reduced distortions that once plagued the market.
A Bureaux De Change (BDC) operator in Lagos, Garuba Sarki, admitted that many dealers recently incurred losses as they were forced to sell below purchasing rates due to the narrowing exchange gap. ‘This is expected to continue in the weeks ahead,’ he said, noting that fresh dollar inflows are likely to strengthen the naira further.
Investors’ Renewed Confidence
The CBN’s reforms under Governor Olayemi Cardoso have not gone unnoticed. International oil companies, foreign portfolio investors (FPIs), and domestic institutions are all responding to what they perceive as a more transparent and accountable foreign exchange regime.
Head of Research at Commercio Partners, Ifeanyi Ubah, explained that Nigeria’s rising reserves are a sign of stronger external buffers. ‘With reserves strengthening, speculative activity subsiding, and oil earnings supporting inflows, many market watchers believe the naira’s current rally has a stronger foundation compared to previous cycles of volatility,’ he said.
Indeed, the combination of foreign portfolio inflows, repatriated earnings from oil companies, and diaspora remittances has significantly bolstered supply. The CBN’s interventions to authorised dealers have further stabilised the market, while a more efficient foreign exchange framework has helped sustain investor interest.
Policy Anchors: FX Code and EFEMS
A major pillar of the ongoing reforms is the Foreign Exchange Code (FX Code), introduced by the CBN to enforce standards of ethics, transparency, and accountability in the market. The FX Code compels institutions to submit detailed compliance plans, signed off at board level, outlining how they intend to uphold best practices in trading and reporting.
According to the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, the FX Code has been a game changer in curbing speculation. ‘By entrenching transparency and accountability in FX market operations, the code has effectively kept speculators in check and strengthened naira stability,’ he said.
Governor Cardoso has stressed that the code is aligned with international standards and tailored to Nigeria’s unique market challenges. ‘The era of opaque practices is over. Violations will be met with penalties and administrative actions under the CBN Act 2007 and BOFIA Act 2020,’ he declared at the launch.
Complementing the FX Code is the Electronic Foreign Exchange Matching System (EFEMS), designed to provide real-time information on currency rates, volumes, and market activity. The system curtails distortions and eliminates the opaque pricing that once allowed speculation to thrive.
Additionally, the CBN lifted the controversial restriction on 41 import items, a policy reversal aimed at improving access to FX for businesses and promoting trade and investment.
Reforms Rooted in Crisis Management
When Cardoso assumed office in October 2023, Nigeria’s FX market was in disarray. A backlog of over $7 billion in unfulfilled obligations, multiple exchange rates, and collapsing investor confidence created a daunting landscape. His immediate priority was unifying the exchange rate to eliminate arbitrage and restore transparency.
‘Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear outstanding foreign exchange obligations, giving businesses the confidence to plan and invest,’ Cardoso said during the last Monetary Policy Committee (MPC) meeting.
From manufacturers to airlines, market participants now report improved planning and smoother access to FX. While challenges remain, the progress has laid a foundation for longer-term stability.
The Diaspora Connection
Beyond oil exports and foreign portfolio investments, Diaspora remittances have become a critical source of FX inflows. Recognising this, the CBN introduced two new products targeted at Nigerians abroad: the Non-Resident Nigerian Ordinary Account (NRNOA) and the Non-Resident Nigerian Investment Account (NRNIA). These accounts allow Nigerians abroad to remit foreign earnings, manage funds in multiple currencies, and invest in domestic financial markets, from bonds and equities to mortgage products. By formalising remittance channels and offering flexibility, the CBN hopes to double receipts within a year.
Western Union’s Regional Vice President for Africa, Mohamed Touhami el Ouazzani, recently noted that Africa received $90 billion in remittances in 2023, underlining their importance for household welfare and financial stability. He described remittances as ‘seeds of change,’ with the potential to transform economies if properly harnessed.
Market Watchers Urge Caution
While optimism is high, experts caution that sustaining the naira’s rally will require more than monetary policy. Analysts stress the importance of maintaining fiscal discipline, boosting crude oil production, and diversifying exports to reduce dependence on oil revenues.
For now, the CBN’s interventions have restored short-term stability. But without structural reforms in energy, manufacturing, and agriculture, Nigeria risks repeating past cycles where temporary rallies gave way to sharp downturns.
A New Era for the Naira?
The naira’s rally represents more than just numbers on a trading screen. It signals a shift in Nigeria’s economic narrative, from a currency battered by speculation and policy inconsistencies to one benefiting from transparency, investor confidence, and strategic reforms.
For businesses, the implications are far-reaching: better planning, reduced hedging costs, and stronger investor appetite. For households, a stable naira means relief from the relentless inflation that has eroded purchasing power. And for policymakers, it represents a chance to consolidate reforms that can finally align Nigeria’s economy with its potential.
Still, the task ahead remains formidable. Exchange rate stability must be complemented by robust productivity growth, non-oil exports, and a disciplined fiscal regime. If these are achieved, the naira could indeed sustain its current momentum and reclaim its place as a true instrument of national pride.