Naira Appreciates to Two-year High of N1,326.69 as Dollar Liquidity Supports

The naira on Wednesday rose to a two-year high of N1,326.69 in the official foreign exchange market, supported by improved dollar liquidity, stronger external buffers and rising formal remittance inflows.

The latest appreciation in the Nigerian Foreign Exchange Market (NFEM) comes as foreign exchange liquidity continues to improve, with Nigeria’s external reserves rising to $53.51 billion in August, the highest level since 2008.

The naira appreciated by 1.5 percent in the NFEM during August, while market turnover rose to $14.68 billion, its highest level in five months, indicating stronger activity and liquidity in the official market, according to a report by FMDA.

Nigeria also recorded $947 million in remittance inflows through International Money Transfer Operators (IMTOs) in July 2026, the highest monthly inflow ever recorded through formal channels and approaching the $1 billion monthly target set by Central Bank of Nigeria (CBN) Governor Olayemi Cardoso.

IMTO inflows reached $3.8 billion in the first seven months of 2026, representing a 50.2 percent increase from the same period in 2025.

The stronger inflows reflect the impact of CBN reforms aimed at making formal remittance channels more competitive, transparent and accessible, including reforms to the IMTO regulatory framework, the introduction of the Non-Resident Bank Verification Number and closer engagement with IMTOs, banks and Nigerian diaspora communities.

More recently, the CBN strengthened requirements for remittance transactions to be routed through designated settlement accounts with authorised dealer banks.

“When we set a clear ambition to reach $1 billion a month in remittance inflows through formal channels nearly two years ago, some people thought we were dreaming. At $947 million in July, we are now approaching that milestone,” Cardoso said.

The increase in formal remittances is significant for the foreign exchange market because stronger diaspora inflows increase dollar supply, improve market transparency and strengthen Nigeria’s external financing position.

Cardoso said the CBN’s focus was not on a single month but on creating conditions for sustained growth in formal remittances.

“July is an important marker, but our focus is not on a single month. It is on creating the conditions for sustained growth in formal remittances. We expect to keep seeing improvement and believe Nigeria can reach and ultimately sustain monthly inflows above $1 billion,” he said.

Higher oil prices are also providing support for the external sector. Average Brent crude prices rose by 5 percent to $87.26 per barrel in August, although prices moved above $90 per barrel at points amid geopolitical tensions in the Middle East.

The stronger external position has coincided with improving domestic liquidity. System liquidity rose by 56.17 percent to N4.65 trillion in August from N2.98 trillion in July, driven by maturing securities, FAAC allocations and other repayments that more than offset the CBN’s liquidity mop-up operations.

However, the strengthening of the naira in the official market is increasingly diverging from movements in the parallel market.

The premium between the NFEM and parallel market widened further in August, reflecting the faster pace of naira appreciation in the official market. The naira gained 1.5 percent in NFEM during the month, compared with only 0.06 percent movement in the parallel market.

Analysts have linked the widening premium partly to the possible emergence of pre-election foreign exchange demand pressures, as increased political activity typically raises demand for dollars.

Dollarisation of real estate transactions may also be sustaining structural demand for foreign exchange, particularly as uncertainties around Capital Gains Tax encourage some sellers to price assets in dollars.

Despite these pressures, the combination of stronger formal remittances, higher reserves, improved market turnover and increased dollar liquidity is providing a stronger foundation for the naira.

The CBN’s challenge now is to ensure that improving foreign exchange liquidity translates into a durable strengthening of the naira without creating excessive domestic liquidity that could undermine monetary stability.