The naira, long plagued by volatility and speculation, is showing rare signs of resilience.
Thanks to the Central Bank of Nigeria’s (CBN) aggressive liquidity interventions and rising foreign inflows, the local currency has experienced relative stability in recent weeks.
While experts warn the gains are fragile, analysts agree that the apex bank’s dollar injections and broader economic reforms have reshaped market expectations and investor sentiment.
In late August, the naira appreciated by 1.1 percent, closing at ₦1,520 per dollar, following a $50 million CBN injection into the market.
Portfolio inflows from Open Market Operation (OMO) auctions also helped improve liquidity, reducing speculative pressure on the currency.
Figures from the National Bureau of Statistics (NBS) highlight this trend. Capital importation rose to $5.64 billion in Q1 2025, a 67 percent increase from $3.37 billion in Q1 2024.
However, a closer look reveals that over 90 percent of the inflows came from short-term portfolio investments, particularly in government bonds and treasury bills.
Foreign Direct Investment (FDI), on the other hand, dropped sharply by 70 percent quarter-on-quarter to just $126.29 million, underscoring persistent concerns about Nigeria’s ability to attract long-term commitments.
“The liquidity is welcome, but it is not enough. We need capital that builds factories, jobs, and infrastructure—not just hot money chasing yields,” said Dr. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON).
The CBN’s efforts are supported by a rebound in Nigeria’s external reserves. As of August 19, 2025, reserves climbed to $41 billion, their highest level in nearly four years.
This represents a 3.7 percent increase from early August and provides the CBN with greater firepower to intervene in the forex market.
Market analysts at Cordros Securities noted that the steady reserve build-up “offers a stronger buffer against speculative attacks” and signals improved foreign exchange supply.
Similarly, Cowry Asset Management projected that reserves could hit $45 billion by year-end, provided offshore inflows remain stable and planned external borrowings materialize.
The renewed stability is rooted in reforms introduced since 2023. These include:
Unifying exchange rates across official and parallel markets.
Halting monetary financing of fiscal deficits.
Phasing out fuel subsidies, which previously drained public finances.
Clearing a $7 billion FX backlog, restoring confidence among foreign investors.
Global institutions have taken notice. The World Bank described the measures as “bold interventions,” while credit rating agencies upgraded Nigeria’s outlook.
Foreign portfolio managers also highlighted the improved flexibility in repatriating profits as a major incentive.
“Nigeria appears to be back in business as long-awaited reforms take shape,” said Emre Akcakmak of East Capital, a global investment firm.
Despite the short-term optimism, challenges remain.
The heavy reliance on portfolio inflows leaves Nigeria vulnerable to shifts in global monetary policy.
If interest rates rise in advanced economies, capital could quickly flow out of emerging markets like Nigeria.
More concerning is the weak FDI performance. Long-term investors remain cautious due to policy uncertainty, insecurity, and infrastructure gaps.
Without a stronger push for non-oil exports, industrial diversification, and power sector reform, Nigeria risks falling back into cycles of currency instability.
Economist Aliyu Ilias stressed that Nigeria must leverage recent GDP rebasing data to attract real investment.
“The new GDP figures show the strength of services and agriculture. But investors need clear, consistent policies that give confidence in the long-term direction of the economy,” he said.
The CBN has also launched a bank recapitalisation programme, requiring lenders to boost their balance sheets in preparation for supporting a $1 trillion economy by 2030.
Governor Olayemi Cardoso emphasized that Nigerian banks must scale up to finance industrial expansion, infrastructure development, and the government’s ambitious economic targets.
While inflation has eased to 21.88 percent in July, the naira’s outlook remains mixed.
Analysts at CSL Stockbrokers predict the exchange rate will hover between ₦1,500 and ₦1,600 per dollar in the second half of 2025, with the CBN expected to sustain interventions.
Standard Chartered’s Head of Africa Strategy, Samir Gadio, added:
“The reforms have restored confidence, but sustainability depends on converting temporary capital inflows into durable investment and ensuring oil production remains stable.”
The naira’s recent stability is a sign of progress, but not yet a victory. The CBN has bought Nigeria time with liquidity injections, reforms, and reserve build-up.
However, unless the country attracts genuine long-term investment and boosts productivity, the currency will remain vulnerable to global shocks.
For now, Nigerians can breathe easier as the naira stabilises, but the true test will be whether this momentum translates into sustainable economic transformation.