Naira Stabilizes Against Dollar as FX Markets Seek Post-Reform Equilibrium (streamlinefeed.co.ke)

The Nigerian naira stabilized against the U.S. dollar in early 2025 following the Central Bank of Nigeria’s implementation of market-driven foreign exchange reforms, officials said. The reforms included harmonizing FX market segments, scrapping multiple exchange windows, and reducing direct intervention, which helped narrow the gap between official and parallel market rates and restored investor confidence, according to President Bola Tinubu and CBN Governor Olayemi Cardoso.

The Central Bank of Nigeria’s (CBN) foreign exchange reforms, implemented in 2024, have played a central role in stabilizing the naira against the U.S. dollar, officials said. These reforms included harmonizing foreign exchange market segments, eliminating multiple exchange windows, and sharply reducing direct intervention. The reforms also involved clearing over 4 billion naira in FX backlogs owed to investors and businesses, which officials said helped restore confidence and ease pressure on the currency.

According to CBN Governor Olayemi Cardoso, the central bank’s participation in the FX market now accounts for only about 1.2 to 1.3 percent of total turnover in 2025, indicating a shift away from heavy currency defense.

Data from the Nigerian foreign exchange market show the naira trading around 1,526.15 naira per dollar at the official window on a Wednesday in July 2025, a modest gain of 3.42 naira from 1,529.57 naira the previous day, reflecting controlled movements. Official figures cited by the Budget Office of the Federation (BOF) indicate that after an initial slump following the reforms, the naira recovered to about 1,525 naira per dollar by August 2025, representing a 15.28 percent gain over five months. The CBN also reported that the gap between official and parallel market rates, historically wide, has narrowed to as little as one naira—1,599 naira per dollar in the official window and 1,600 naira per dollar in the parallel market—marking a significant reduction in arbitrage opportunities and speculative pressure.

President Bola Tinubu confirmed that the naira has stabilized from the volatility experienced in 2023 and 2024, noting that the exchange rate is no longer primarily determined by oil price fluctuations. He said the narrowing of the gap between official and parallel market rates is due in part to the FX reforms and increased capital and remittance inflows. Tanimu Yakubu, director-general of the BOF, credited the reforms, higher oil prices, and strong diaspora remittances for the currency’s stabilization. The BOF described the unification of FX markets as a key step that created a single, transparent rate and restored investor confidence, helping the naira find a post-reform equilibrium.

The CBN emphasized that disciplined reforms and policy clarity have brought stability to the naira at a more sustainable level against the dollar. Central bank data reported by media outlets show day-to-day changes in the naira’s value remain below 0.3 percent, with examples including a 0.22 percent appreciation and a 0.01 percent depreciation, underscoring the pattern of incremental, controlled movements rather than disorderly fluctuations.

Nigeria’s gross external reserves have also contributed to the naira’s stability. As of February 16, 2026, reserves reached $50.45 billion, the highest level in 13 years, according to CBN data cited by analysts. This represents an increase of approximately 32.62 percent from $38.5 billion a year earlier. The BOF attributed the currency’s rebound partly to higher crude oil receipts, which increased foreign exchange supply, and to strong diaspora remittances, which further supported the naira in the unified market. Both President Tinubu and the BOF linked the combination of FX reforms, improved inflows, and stronger reserves to the current phase in which the naira trades within a more stable and less volatile range.

The International Monetary Fund (IMF) praised Nigeria’s FX reforms in its 2025 Article IV Consultation report, noting that the measures have supported price discovery and liquidity in the naira market. The IMF observed that foreign exchange interventions and market reforms have brought stability to the currency by reducing volatility and improving market functioning. Data accompanying the IMF report showed the naira appreciated by 0.22 percent on a specific trading day, illustrating the gradual strengthening trend under the reformed regime. International assessments have acknowledged that while the naira initially depreciated sharply after market harmonization, it subsequently stabilized and partially recovered as reforms took hold and foreign exchange inflows improved.

Despite these developments, analysts and CBN-linked reports caution that the naira’s stability remains relative and vulnerable to external shocks, volatile capital flows, and domestic inflationary pressures. The Punch newspaper noted that while reserves have risen and market distortions eased, these improvements could be reversed by global financial tightening or a sharp fall in oil prices. The FX market harmonization initially led to a year-on-year depreciation of about 214 to 215 percent, from roughly 471 naira per dollar to 1,482.72 naira per dollar, illustrating the adjustment costs of reform. CBN officials maintain that the naira is not being artificially propped up but acknowledge that sustaining stability depends on continued policy discipline and adequate foreign exchange supply. Government and expert commentary describe the current phase as a post-reform equilibrium characterized by greater stability than during the 2023–2024 crisis but still requiring ongoing reform implementation and macroeconomic management.