Nigeria’s currency ended January 2026 on a stronger footing, with the naira appreciating against the United States dollar at the official foreign exchange market, offering cautious optimism about improving liquidity conditions and short-term macroeconomic stability.
Data released by the Central Bank of Nigeria (CBN) showed that the naira closed trading at ₦1,386.55 per dollar on the final trading day of January, marking a notable recovery from the volatility witnessed earlier in the month.
The performance reflects growing confidence in recent policy adjustments and improved foreign exchange inflows.
Naira closes January at 1,386/$ amid steady appreciation
The official Nigerian Foreign Exchange Market (NFEM) rate strengthened by 2.47 per cent week-on-week, rising from a previous high of ₦1,422.07/$ recorded on January 23 to ₦1,386.55/$ by January 31.
The appreciation followed a consistent upward movement that began on January 26, when the naira traded at ₦1,418.95/$ before gaining steadily through the week.
Although the currency briefly touched a weekly high of ₦1,423.50/$ earlier in the period, analysts observed that the spread between daily highs and lows narrowed significantly toward the end of the month.
This trend suggests reduced speculative pressure and a phase of relative stability in the official market.
The official exchange rate remains particularly significant because it determines the cost of eligible foreign transactions processed through banks, including school fees, medical bills, and corporate international payments.
Any sustained strengthening at this window often has broader implications for pricing, inflation, and business confidence.
Inflation outlook and impact on imports
Economists note that a firmer naira could help ease inflationary pressures, especially on imported goods and services that have driven headline inflation in recent months.
Nigeria’s heavy dependence on imports makes the exchange rate a critical transmission channel for price stability.
Market analysts believe that if the naira’s gains are sustained into February, importers could begin to see modest cost relief, potentially slowing the pace of price increases in food, pharmaceuticals, and manufactured goods.
Parallel market mirrors official gains
The naira’s performance was not limited to the official window. In the parallel market, the currency also recorded gains, reflecting improved sentiment across the broader foreign exchange landscape.
Analysts at Cowry Assets Management Limited reported that the naira appreciated by 2.11 per cent in the parallel market, closing at ₦1,444.19/$.
CardinalStone Research, however, placed the closing parallel rate slightly weaker at ₦1,465.00/$, highlighting lingering disparities between data sources and trading locations.
AIICO Capital also confirmed that the naira ended January stronger on the streets, appreciating by 1.28 per cent from ₦1,490.00/$ at the start of the month to ₦1,460.00/$ by month-end.
According to market analysts, several factors contributed to the improved performance of the local currency in January. These include:
Improved FX liquidity, driven by increased participation from foreign portfolio investors and local market players
Stronger oil receipts, supported by relatively stable global crude oil prices
Minimal direct intervention by the CBN, allowing market forces to play a greater role
Rising external reserves, which boosted confidence in Nigeria’s ability to meet foreign obligations
AIICO Capital disclosed that Nigeria’s external reserves increased by $687.4 million month-on-month, reaching $46.18 billion by the end of January.
The growth was attributed to better FX inflows from oil exports, diaspora remittances, and ongoing stabilisation measures introduced by monetary authorities.
Looking ahead, analysts project that the naira will remain broadly stable but mildly volatile in February. Cowry Assets Management expects moderate gains to persist, supported by steady oil inflows, stronger non-oil FX earnings, and Nigeria’s trade surplus position.
“Oil prices are expected to remain stable to mildly bullish, reflecting steady global demand and unchanged interest rates from the United States Federal Reserve,” the firm said in its outlook.
AIICO Capital similarly projected modest appreciation, noting that robust external reserves and sustained monetary and fiscal reforms could continue to support the naira in the near term.
Analysts, however, cautioned that external shocks and policy uncertainty remain downside risks.
Tax concerns fuel dollar demand
Despite the positive trend, demand for dollars remains elevated in the parallel market due to growing concerns over Nigeria’s evolving tax regime.
Bloomberg reported that uncertainty surrounding new tax laws has prompted individuals and businesses to convert naira holdings into dollars as a precautionary measure.
A bureau de change operator, Abubakar Muhammed, told Bloomberg that many Nigerians are moving into dollar assets to avoid potential scrutiny.
“People are converting naira to dollars to secure their assets. Demand may ease once there is clarity around the tax framework,” he said.
The Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, echoed this view, noting that fear of account restrictions has driven short-term dollar hoarding. “In the interim, people are buying dollars and keeping them aside,” he said.
While the naira’s January performance signals improving market confidence, experts warn that sustaining gains will depend on consistent FX inflows, policy clarity, and broader economic reforms.
For now, the currency’s ability to close January stronger than it began offers a positive signal for policymakers and investors navigating Nigeria’s complex foreign exchange environment.
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