Deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability are beginning to pay off in Nigeria’s foreign exchange market. The naira sustained its rally this week, closing at N1,497/$1 at the official Nigerian Foreign Exchange Market on Monday with the rebound driven by a combination of stronger demand for the naira, reduced speculative trading, and rising foreign reserves, now at $41.69 billion on September 12. Precious Ugwuzor reports that these reforms instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN) are stabilising exchange rates and improving the overall health of the economy

The naira on Monday rallied to one of its strongest positions in recent months, closing below N1,497/$ at the official Nigerian Foreign Exchange Market.

The naira gains have been attributed to reforms instituted by the Central Bank of Nigeria (CBN) and the rising transparency, accountability, and dollar access in the foreign exchange market.

According to data from the CBN, the naira traded between N1,498/$ and N1,507/$ at last week’s trading sessions, continuing the positive trajectory that began in early September when it opened at N1,526.09/$.

The parallel market mirrored the trend, with the naira strengthening to between N1,515/$ and N1,517/$ in the course of the week.

Analysts at Commercio Partners attributed the rally to a combination of stronger demand for the naira, reduced speculative trading, and improved foreign reserves.

Head of Research at Commercio Partners, Ifeanyi Ubah, expressed optimism that the positive sentiment would be sustained in the near term, supported by increasing external buffers.

“Nigeria’s external reserves stood at $41.69 billion on September 12, 2025, and have consistently grown in recent weeks, reflecting a healthier external position for the country. 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.

However, other experts caution that sustaining this momentum will depend on the government’s ability to maintain macroeconomic discipline, boost crude oil production, and diversify export earnings.

How stronger naira impacts trade

With improvement in the exchange rate comes reduced cost for import. Importation costs in Nigeria include various taxes and charges, primarily import duties, VAT, and other levies. These costs are calculated based on the CIF value (Cost, Insurance, and Freight) of the goods, which includes the cost of the goods, insurance, and shipping.

The cost, insurance, and freight (CIF) price is the price of a good delivered at the frontier of the importing country, or the price of a service delivered to a resident, before the payment of any import duties or other taxes on imports or trade and transport margins within the country.

Changes in the exchange rate can significantly impact the cost of imports, as duties and other charges are often calculated based on the prevailing exchange rate.

Nigeria’s total imports in 2024 were valued at $40.97 billion, according to the United Nations COMTRADE database on international trade. Nigeria’s main import partners were China, Belgium, and India.

New figures from the National Bureau of Statistics (NBS) reveal that Nigeria imported food and beverages worth N1.67 trillion ($1 billion) during the first quarter of 2025 (January–March), reflecting a five per cent increase from the N1.59 trillion recorded over the same period in 2024.

Rebased GDP to benefit from naira rally

Afrinvest West Africa Limited says Nigeria’s rebased Gross Domestic Product (GDP) needs 21.9 per cent growth at N1,500/$ exchange rate to achieve the $1 trillion economy target by 2031.

In its 20th Nigeria Banking Sector Report 2025 titled “ACT-BOLD: Beyond a Trillion-Dollar Economy” released in Lagos, Group Managing Director, Afrinvest West Africa Limited, Ike Chioke, explained that at a rebased GDP nominal size of N372.8 trillion, Nigeria requires a minimum annual growth rate of 21.9 per cent to attain the $1 trillion economy valuation by 2031.

It was further predicted that an exchange rate of N1,500.00/$1 or a much stronger exchange rate at a slower growth rate is required to attain the GDP size milestone.

The report indicated that despite the current administration’s confidence that the banking industry will support the $1 trillion economy target realisation, there was need to address longstanding impediments that constrain broad-based growth potential.

Without such intermediation, banks would only deliver, at best, uneven and subpar growth across a few services-based sectors, while the overall economy continues to grow at a slow pace.

Nigeria’s Statistician-General, Adeyemi Adeniran, revealed that incorporated new and emerging sectors, consumption basket updates, and refined data collection methods helped produce a more complete picture of national output.

Adeniran explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09 trillion, N213.63 trillion in 2020, N243.30 trillion in 2021, N274.23 trillion in 2022, N314.02 trillion in 2023, and N372.82 trillion in 2024.”

The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023, and 35.4 per cent in 2024.

“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS said.

Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

Aliyu Ilias, a developmental economist, noted that several sectors have previously remained uncaptured in official data, particularly entertainment. “By rebasing our GDP now, we included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide government resource allocation. “It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.”

“Finally,” he added, “it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort.”

Ilias explained that while this statistical adjustment does not instantly generate new revenue, it creates a more reliable framework for fiscal planning, investment strategies, and development interventions.

It is also recognised that Nigeria’s hope of achieving the $1 trillion economy by 2030 will gain significant support from the banking sector.

Improved FX access

Before now, one of the biggest challenges facing the Nigerian economy was limited access to forex.

That challenge meant that businesses and travellers had to turn to the parallel FX market to source funds and in the process create arbitrage that opened the doorway for FX speculation to thrive.

In response, the CBN embarked on a series of bold reforms to attract more foreign capital to the economy, and achieve price and exchange rate stability.

In 2023 the new administration and the CBN, led by its Governor, Olayemi Cardoso, liberalised the foreign exchange market, stopped central bank financing of the fiscal deficit, and reformed fuel subsidies. The government also strengthened revenue collection and took strategic steps to reduce the surging inflation rate.

Since these reforms were implemented, international reserves have increased, and anyone can now access foreign exchange in the official market.

Nigeria successfully returned to international capital markets last December and was recently upgraded by rating agencies. A new domestic, private refinery is positioning Nigeria up the value chain in a fully deregulated market.

FX reserves position rises

The Olayemi Cardoso-led Central Bank of Nigeria (CBN) recently announced a quantum leap in the net FX reserve position at $23.11 billion at the end of last year before hitting the current milestone at $41.66 billion.

Cardoso, upon assuming office in October 2023, prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience.

In the foreign exchange market, the apex bank faced a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime characterised by multiple forex rates, which had encouraged arbitrage opportunities.

“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 the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso said.

More FX sources bolster inflows

Foreign capital inflows to the domestic economy remain crucial elements in the drive to achieve monetary and fiscal policy stability.

The apex bank is cultivating more sources of FX to increase dollar inflows and boost access to manufacturers and retail end-users.

From moves to boost diaspora remittances through new product development, granting licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the CBN has simplified dollar-inflow channels for FX dealers to boost business and economic growth.

President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the policy shifts showed the level of creativity, policy, and hard work Cardoso puts into ensuring that more forex flows into the economy and remains accessible to businesses.

He said diaspora remittances to Nigeria, estimated at $23 billion annually, remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

According to the apex bank’s data, Net FX Reserve (NFER) stood at $23.11 billion, the highest level in over three years, a marked increase from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021.

The NFER, which adjusts gross reserves to account for near-term liabilities such as FX swaps and forward contracts, is widely regarded as a more accurate indicator of the foreign exchange buffers available to meet immediate external obligations.

The increase in reserves reflects a combination of strategic measures undertaken by the CBN, including a deliberate and substantial reduction in short-term foreign exchange liabilities—notably swaps and forward obligations.

The strengthening was also spurred by policy actions to rebuild confidence in the FX market and increase reserve buffers, along with recent improved foreign exchange inflows—particularly from non-oil sources.

The result is a stronger and more transparent reserves position that better equips Nigeria to withstand external shocks. The expansion occurred even as the CBN continues to reduce short-term liabilities, thereby improving the overall quality of the reserve position.

“This improvement in our net reserves is not accidental; it is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability,” Cardoso commented.

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This improvement in our net reserves is not accidental; it is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability

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