Nigeria’s naira closed January at 1,386.55 to the U.S. dollar in the official foreign exchange market, strengthening sharply in the final week of the month, according to data published by the Central Bank of Nigeria (CBN).
The currency appreciated about 2.5 percent over the week, recovering from a low of 1,422.07 per dollar recorded on Jan. 23. The gains marked one of the strongest weekly performances for the naira in recent months and pointed to improving stability in the official market.
The official Nigerian foreign exchange market rate is used for corporate international payments and eligible transactions such as school fees, medical expenses and other approved imports processed through the banking system.
CBN data showed the naira began a steady upward trend on Jan. 26, moving from 1,418.95 per dollar and closing the month at its strongest level of 1,386.55. While the currency briefly weakened to a high of 1,423.50 per dollar earlier in the week, the narrowing gap between daily highs and lows suggested reduced volatility towards month-end.
Currency analysts said the strengthening of the official rate is significant for Africa’s largest economy, where imported inflation has been a key driver of price pressures following repeated currency devaluations over the past two years.
“If sustained, this trend could help ease inflationary pressures on imported goods and services,” analysts at Lagos-based Cowry Assets Management Limited said in a weekly market note.
The naira also posted gains in the parallel market, where it is more freely traded. Cowry Assets said the currency appreciated 2.11% over the week to around 1,444.19 per dollar, broadly tracking the recovery seen in the official window.
Other market estimates showed some divergence. Financial services firm CardinalStone said the naira traded at around 1,465 per dollar in the parallel market, while AIICO Capital estimated that the currency strengthened 1.28% over January to close the month at about 1,460 per dollar.
AIICO Capital attributed the month’s performance to improved foreign exchange liquidity and limited intervention by the central bank.
“Stability prevailed throughout the month, with modest naira appreciation driven by improved FX liquidity from foreign portfolio investors, local market participants and minimal CBN intervention,” the firm said.
Nigeria’s external reserves also increased in January, providing additional support for the currency. AIICO Capital said reserves rose by about $687 million month-on-month to $46.18 billion, supported by higher oil receipts, remittances and other foreign inflows, as well as ongoing stabilisation measures.
Analysts said oil prices remain a key variable for the naira, given Nigeria’s heavy reliance on crude exports for foreign exchange earnings. Cowry Assets said oil prices were likely to remain stable to mildly bullish in the near term, supported by steady global demand and unchanged U.S. Federal Reserve interest rates.
Looking ahead, market participants expect the naira to remain volatile but broadly stable in February.
“Robust external reserves and expectations of sustained high crude oil prices should provide support, alongside ongoing monetary and fiscal reforms aimed at boosting foreign inflows,” AIICO Capital said, adding that near-term downside risks from external shocks appeared limited.
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However, pressure persists in the parallel market, where demand for dollars has been driven by uncertainty surrounding Nigeria’s new tax laws, according to market participants.
Bloomberg reported that concerns over increased tax scrutiny have prompted individuals to convert naira holdings into dollars as a store of value. A bureau de change operator, Abubakar Muhammed, told the news service that some individuals were buying dollars to secure their assets or avoid attention from tax authorities.
“We may see the dollar demand start to wane and the rate appreciate gradually when there is more clarity around the tax,” Muhammed said.
Bismarck Rewane, chief executive of Financial Derivatives Company, confirmed the trend, saying uncertainty had fuelled precautionary demand for foreign currency.
“People are afraid that tax authorities could actually lock their accounts. In the interim, what they are doing is just buying U.S. dollars and keeping them aside,” Rewane said.
Despite these pressures, analysts said the naira’s performance in January signalled tentative progress in Nigeria’s efforts to stabilise its currency after a period of sharp depreciation and market reforms aimed at restoring investor confidence.
