The Nigerian naira has made a quiet but significant comeback at the official foreign exchange window, buoyed by a sharp rise in the country’s external reserves. 

The Central Bank of Nigeria (CBN) confirmed that Nigeria’s foreign reserves now stand at $39.99 billion, inching ever closer to the $40 billion mark. This milestone comes after 21 separate FX inflows hit the nation’s coffers in recent weeks.

The renewed strength of the naira comes after a brief dip, with the currency appreciating slightly to ₦1533.73 per dollar, a gain from the previous day’s ₦1534.43. Though the shift appears small, analysts say it reflects growing stability in Nigeria’s tightly managed FX market.

What’s driving the reserves surge?

While the CBN has not disclosed the exact sources of the recent inflows, experts believe they are a mix of export earnings, foreign direct and portfolio investments, and revenues from oil sales. 

The timing is crucial: as global uncertainty continues to affect emerging markets, Nigeria’s improving reserve position could serve as a critical buffer.

International oil companies, exporters, and foreign investors are said to be contributing significantly to the liquidity, creating a more optimistic atmosphere in the official market. 

The increased reserve level gives the CBN more room to meet dollar demands and helps shore up investor confidence, particularly among those watching Nigeria’s economic reform efforts.

Gains in the official market and pressure in the black market

Even as the official market welcomes good news, the parallel market tells a different story. The naira dropped to ₦1560 per dollar in the black market, widening the gap between official and unofficial rates. 

According to Bureau de Change operators, there’s been a surge in dollar demand for non-official needs like paying tuition, funding overseas medical treatment, and settling online payments.

With commercial banks reportedly limiting dollar supply to BDCs, many traders are now turning to peer-to-peer channels to meet demand. This has led to fresh concerns about market distortion and speculation.

Investors betting on Nigeria

Market analysts say the naira’s narrow trading band ranging from ₦1531.99 to ₦1535.99 during intraday trading signals increasing confidence in the FX space. The consistent inflows have not only helped the naira regain footing but also improved overall liquidity and lowered funding pressure.

“There’s still a lot of work to be done in terms of managing demand and stabilizing the FX environment,” one analyst noted, “but the rising reserves are a good sign that Nigeria may be turning the corner.”

Global markets react to geopolitical signals

On the global stage, commodities showed mixed movement. Oil prices dipped slightly on expectations of diplomatic discussions between the U.S. and Russia over the Ukraine crisis. 

Brent crude dropped to $66.41, while U.S. WTI settled at $63.81. Meanwhile, gold surged as investors looked for safer assets in the face of geopolitical uncertainty and sluggish U.S. job numbers.