Nigeria’s currency market recorded another cautiously positive signal mid-week as the naira appreciated at the official foreign exchange window, reinforcing a gradual recovery trend that has begun to reshape sentiment around the country’s macroeconomic outlook. Fresh data released by the Central Bank of Nigeria (CBN) showed that the local currency strengthened further at the Nigerian Autonomous Foreign Exchange Market (NAFEM), supported by sustained external reserves, improved dollar liquidity, and tightening monetary conditions.
At the official market, the naira closed at ₦1,359 to the United States dollar on Wednesday, marking a steady improvement from ₦1,367/$ on Tuesday and ₦1,384.50/$ on Monday. The mid-week gain extended a trend that analysts say reflects renewed confidence in Nigeria’s foreign exchange reforms and a more disciplined policy environment under the current monetary framework.
However, the picture remained mixed across market segments. In the parallel market, also known as the black market, the naira experienced a mild depreciation, trading at an average of ₦1,453.13/$ on Wednesday compared with ₦1,445/$ the previous day. Despite this divergence, the gap between the official and parallel market rates continued to narrow, declining to ₦94 from ₦96 recorded a week earlier. Market watchers view this gradual convergence as a critical indicator of improving price discovery and reduced speculative pressure.
According to DDM NEWS analysis, narrowing spreads between the two markets suggest that arbitrage opportunities are shrinking, a development widely regarded as essential for restoring confidence among foreign portfolio investors and exporters who rely on transparent pricing. Analysts note that sustained convergence could also discourage round-tripping and other distortions that have historically plagued Nigeria’s foreign exchange system.
A major factor underpinning the naira’s relative stability is the country’s external reserve position. Data from the CBN showed that Nigeria’s external reserves stood at $46.59 billion as of February 2, 2026, providing the monetary authorities with short-term capacity to intervene in the market when necessary. While the reserves are not being aggressively deployed, their size continues to act as a psychological buffer, reassuring investors that the central bank retains sufficient firepower to smooth excessive volatility.
Financial analysts say the recent appreciation at the official window reflects a combination of improved dollar supply, cautious but consistent intervention strategies, and the impact of tight monetary policy aimed at curbing inflation and stabilising the currency. The CBN’s continued commitment to orthodox monetary tools, including elevated interest rates and liquidity management, has also helped temper speculative demand for foreign currency.
DDM NEWS gathered that market participants are increasingly responding to signals of policy coherence, particularly the alignment between fiscal authorities and the central bank on issues such as subsidy reforms, revenue mobilisation, and debt management. These efforts, though still evolving, are gradually reshaping perceptions of Nigeria’s macroeconomic credibility after years of policy uncertainty.
The naira’s recent movement also marks a recovery from bouts of volatility seen in previous weeks. Just last week, the currency traded around ₦1,394/$ at the official market, reflecting lingering pressures linked to import demand, delayed export proceeds, and seasonal dollar shortages. This week’s close at ₦1,359/$ therefore represents a notable turnaround, reinforcing expectations that the worst of the turbulence may be easing, at least in the short term.
Despite the improvement, economists caution that the recovery remains fragile and highly sensitive to both domestic and external shocks. Global oil prices, capital flow dynamics, and geopolitical developments continue to influence Nigeria’s foreign exchange position, given the country’s reliance on crude oil exports for dollar earnings. Any sharp decline in oil prices or disruption to production could quickly reverse recent gains.
Looking ahead, projections for 2026 suggest a cautiously optimistic outlook for the naira. Investment firm CardinalStone recently forecast that the currency could trade within a band of ₦1,350 to ₦1,450 per dollar over the course of the year. The projection is anchored on expectations of stronger capital inflows, moderated import demand, and sustained monetary discipline by the CBN.
CardinalStone analysts noted that ongoing reforms in the foreign exchange market, including improved transparency at the NAFEM window and efforts to clear outstanding FX backlogs, could further stabilise the currency if consistently implemented. The firm also highlighted the importance of boosting non-oil exports and attracting long-term foreign direct investment as key structural drivers of currency strength.
Investor sentiment received an additional boost after S&P Global Ratings reaffirmed Nigeria’s sovereign credit rating at B-, maintaining a positive outlook. The ratings agency cited improvements in fiscal coordination, better management of external balances, and the authorities’ willingness to pursue difficult reforms as factors supporting its assessment. According to DDM NEWS, the reaffirmation has helped temper concerns among international investors who remain wary of emerging market risks amid tightening global financial conditions.
Nonetheless, challenges persist. Inflation remains elevated, eroding purchasing power and increasing demand for dollars as a store of value. Import-dependent sectors continue to exert pressure on the currency, while structural bottlenecks in power, logistics, and manufacturing limit Nigeria’s ability to rapidly expand export capacity. These factors underscore the need for complementary reforms beyond monetary policy alone.
Economists also point to the behaviour of the parallel market as a reminder that confidence has not been fully restored. While the gap with the official rate is narrowing, persistent depreciation in the informal market reflects lingering uncertainty among households and small businesses that lack direct access to the official window. Bridging this confidence gap will require not only stable pricing but also sustained access to FX for genuine trade and investment needs.
According to The Business Bureau, the naira’s recent appreciation, though modest, carries symbolic weight. Consistent gains at the official window signal that policy direction is beginning to yield results, even if the process remains uneven. Market participants say stability, rather than dramatic appreciation, is the more realistic and desirable goal at this stage of Nigeria’s economic adjustment.
DDM NEWS observes that the coming months will be critical in determining whether the naira can maintain its current trajectory. Continued growth in external reserves, disciplined fiscal spending, and clear communication from the CBN will play central roles in shaping expectations. Equally important will be Nigeria’s ability to attract and retain foreign capital in a competitive global environment where investors are increasingly selective.
For now, the naira’s move to ₦1,359/$ at the official market represents a tentative step toward stability rather than a definitive turnaround. Yet in a currency market long characterised by volatility and uncertainty, even incremental progress is being greeted with cautious optimism. As reforms deepen and confidence slowly rebuilds, stakeholders will be watching closely to see whether this fragile recovery can be sustained into the second half of 2026 and beyond.
